Wall Street stocks rallied and the dollar retreated Wednesday after the Federal Reserve cut interest rates and signaled it expects to hold off on further rate changes for now.
The Fed’s action marked its third straight interest rate cut. Fed Chairman Jerome Powell said trade wars and Brexit uncertainty had weighed on business investment but that the US economy had stayed “resilient.”
“We took this step to help keep the US economy strong in the face of global developments and to provide some insurance against ongoing risks,” Powell said.
Stocks were little changed before the Fed announcement but pushed higher after the central bank released its decision at 1800 GMT. The S&P 500 gained 0.3%, rising to 3,046.77 and scoring its second record in three days.
Earlier, European stocks finished mixed while bourses in Asia retreated.
“The street got very much what they expected and therefore is breathing a sigh of relief,” said Art Hogan, chief market strategist at National Securities.
The dollar retreated against the euro and the pound.
Shaun Osborne, chief FX strategist at Scotiabank, cited Powell’s comments on low inflation, which suggested the US central bank would not be in a rush to hike interest rates.
“The market was concerned about interest rates rising again in 2020,” Osborne said. “It has calmed the concern for the time being.”
News that auto giants Fiat Chrysler and Peugeot-maker Groupe PSA were in talks on a possible $50-billion mega-merger sparked local interest, with both shares making sharp gains.
In Paris, PSA rallied 5.4% while in Milan Fiat Chrysler Automobiles (FCA) surged 10%.
A merger would bring PSA access to the lucrative US market while helping it survive the twin impact of the global economic slowdown and trade war worries, analysts said.
A source familiar with the matter told AFP on Wednesday afternoon that the board of PSA had approved the proposed tie-up but that the deal still needs to be given the green light by the FCA’s board.
Among other companies, General Electric shot up 11.5% after reporting better-than-expected third-quarter profits and boosting some of its financial targets despite reporting another large loss.
Boeing dropped 0.8% after CEO Dennis Muilenburg endured another grilling on Capitol Hill over the company’s development of the 737 MAX, which has been grounded following two fatal crashes. At least two lawmakers called for Muilenburg to resign over the crisis.