NEW YORK (Reuters) - Global stocks rallied and the U.S. dollar slid to a three-year low against major currencies on Wednesday after the Federal Reserve signaled it would retain extensive support for the U.S. economy.
Wall Street advanced broadly and oil rose after the Fed said in a statement it believed the recovery was proceeding at a moderate pace and pledged to keep interest rates, now near zero, extraordinarily low for ”an extended period.
The Nasdaq surged to a 10-year high and gold rose to a record above $1,525 an ounce after Fed chairman Ben Bernanke reiterated the Fed’s stance that inflation was a transitory problem related largely to commodity price pressures.
Bolstered by bullish comments from General Electric (GE.N) and another round of better-than-expected earnings, this time from Boeing Co (BA.N), Whirlpool Corp (WHR.N) and WellPoint Inc WLP.N, stocks staged a late-day rally.
Investors’ high marks for Bernanke also boosted optimism.
“He struck the right balance between education, straightforwardness and the limitations of making policy in an uncertain world,” said David Joy, chief market strategist at Columbia Management in Boston.
“He even closed with a note of optimism,” Joy said about the first news conference by a Fed chief in the U.S. central bank’s 97-year history.
The Nasdaq Composite Index closed at the highest for the technology-rich index since December 12, 2000 while gold set its eighth record high in nine trading sessions.
The Dow Jones industrial average .DJI closed up 95.59 points, or 0.76 percent, at 12,690.96. The Standard & Poor's 500 Index .SPX gained 8.42 points, or 0.62 percent, at 1,355.66. The Nasdaq Composite Index .IXIC rose 22.34 points, or 0.78 percent, at 2,869.88.
The dollar, which has been under persistent pressure in recent months, slid further when Bernanke forecast weaker U.S. growth in the first three months of 2011.
The dollar fell to its lowest since 2008 against a basket of six currencies. The dollar index .DXY slid as low as 73.261, not far from an all-time low of 70.698 hit in July 2008.
The euro was up 0.96 percent at $1.4782, while the dollar was up 0.72 percent at 82.09 yen against the Japanese yen.
Bernanke’s comments came after the policy-setting Federal Open Market Committee said that it intends to end its $600 billion bond-buying program in June as scheduled and suggested it would not let its balance sheet run down immediately.
The language, along with a continued showing of solid corporate earnings, helped bolster Wall Street’s gains.
“The tweaks in the QE2 language strongly suggest they are going to continue not only with QE2 but reinvesting mortgage cash flows,” said Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.
The price of U.S. 30-year Treasury bonds fell to session lows, losing more than 1 point, after the Fed raised its inflation forecasts.
The 30-year bond was down 1-1/32 in price to yield 4.46 percent. The benchmark 10-year U.S. Treasury note yielded 3.36 percent, down 13/32 in price.
Crude prices rose in choppy trading after government data showed declining U.S. gasoline stockpiles.
U.S. crude oil for May delivery settled at $112.76 a barrel, gaining 55 cents. In London, May Brent crude closed at $125.13 a barrel, up 99 cents.
Reporting by Ryan Vlastelica and Richard Leong in New York and Harpreet Bhal Alex Lawler and Amanda Cooper in London; Writing by Herbert Lash; Editing by James Dalgleish