Expected losses in bank shares on the likelihood of lower interest rates were more than offset by gains in the technology sector, lifting Wall Street’s benchmark to near its highest in five months.
“The markets believe that with the Fed on hold the economy will start to show improvement,” said Carin Pai, executive vice president at Fiduciary Trust Company International, based in New York.
The Dow Jones Industrial Average rose 227.49 points, or 0.88 percent, to 25,973.16, the S&P 500 gained 31.9 points, or 1.13 percent, to 2,856.13 and the Nasdaq Composite added 111.38 points, or 1.44 percent, to 7,840.35.
MSCI’s gauge of stocks across the globe gained 0.70 percent.
The pan-European STOXX 600 index lost 0.04 percent and emerging market stocks rose 0.10 percent.
Brazil’s stock benchmark fell sharply after former President Michel Temer, who left office three months ago, was arrested as part of a sweeping anti-corruption investigation known as “Car Wash.”
The Bovespa fell 1.2 percent while the Brazilian currency lost 0.58 percent at 3.7981 per dollar.
With investors rushing to price in the end of the Fed’s tightening cycle, benchmark Treasury yields touched their lowest since early 2018 and those on German Bunds – Europe’s benchmark – fell to the lowest since October 2016.
The U.S. 10-year note was little changed in price, but the yield spread between the three-month Treasury bill and the 10-year shrank to its narrowest level since August 2007. A narrow spread between the two yields indicates increased market expectations of a recession.
“The Fed has doubled down on its dovish tilt,” said Matt Freund, head of fixed-income strategies at Calamos Investments. “The global economy is clearly softening and the Fed is looking at liquidity conditions.”
Ten-year Bunds were offering buyers virtually nothing at yields of just 0.047 percent.
Benchmark U.S. 10-year notes were little changed in price, yielding 2.5369 percent, from 2.537 percent late on Wednesday.
The 30-year bond last rose 8/32 in price to yield 2.9635 percent, from 2.975 percent late on Wednesday.
With central banks having already cut rates to the bone and tried full-scale money printing, investors are concerned that many are now low on traditional ammunition to fight recessions.
The U.S. dollar recouped most of the ground lost in the previous session on the Fed’s statement. Sterling continued to fall as Britain’s Prime Minister Theresa May headed into an EU meeting in Brussels with the rising likelihood of a no-deal Brexit.
The pound was recently trading at $1.3078, down 0.86 percent on the day.
The dollar index rose 0.76 percent, with the euro down 0.5 percent to $1.1354.
Norway’s currency shot up after its central bank, going against the grain, raised interest rates and signaled a 50-50 chance another hike will follow by mid-year.
The Norwegian krone gained 0.38 percent versus the U.S. dollar at 8.47.
Oil prices edged lower, but held near 2019 highs, supported by a tightening of global stocks, OPEC production cuts and U.S. sanctions on key producers Iran and Venezuela.
U.S. crude fell 0.56 percent to $59.89 per barrel and Brent was last at $67.75, down 1.09 percent on the day.
Spot gold dropped 0.3 percent to $1,308.83 an ounce. Copper lost 0.34 percent to $6,435.00 a tonne.