Wall Street extended its gains after the US Federal Reserve raised its key interest rate and reiterated that further increases would follow a gradual path.
The central bank lifted its target lending rate to a range of between 0.75% and 1%, the Federal Open Market Committee said. Voting against the action was Neel Kashkari, who preferred to maintain the existing target range.
"In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range for the federal funds rate," the FOMC said.
"Near-term risks to the economic outlook appear roughly balanced. The committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."
The Fed maintained its forecast for a total of three rate hikes this year. This helped send the yield on the benchmark 10-year US Treasury note to its biggest one-day drop since June, falling to 2.500% from 2.595% on Tuesday.
A dollar Index, which measures the US currency against 16 others, fell 1.1%. The index had been down about 0.3% before the Fed's announcement.
"The Fed has come to use a new term that they will use the window when they have it," Henrik Drusebjerg, chief strategist at Carnegie Investment Bank, told Bloomberg before the Fed announcement. "If the economy is strong, they will continue hiking."
Investors said they viewed rising rates as a sign of economic strength, lifting stocks along with hopes for tax cuts and increased government spending under the Trump administration.
Wall Street surges
At the close of trading in New York, the Dow Jones Industrial Average rose 112.73 opints, or 0.5%, to 20,950.10. The Nasdaq Composite Index gained 0.7% to 5900.05, while the Standard & Poor's 500 Index added 0.8% to 2385.26.
The Dow advanced, led by gains in UnitedHealth and JPMorgan Chase shares, up 1.3% and 0.8% respectively.
A report from the National Association of Home Builders/Wells Fargo showed that confidence among US homebuilders climbed in March to reach the highest level since 2005.
Oil prices rose following an Energy Information Administration report showing a surprise drop in US crude stockpiles last week, the first weekly drop since December.
"For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve," the IEA said.
In Europe, the Stoxx 600 Index finished the day with 0.4% advance from the previous close. Germany's DAX Index rose 0.2%, as did the UK's FTSE 100 Index and France's CAC 40 Index.
In the Netherlands, the benchmark AEX Index rose 0.3%. Dutch voters are at the polls until 9am New Zealand time voting in a general election. The latest polls showed a decline in support for Geert Wilders' anti-Islam, anti-European Union Freedom Party.
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