Stocks gain and dollar falls as Fed keeps rates near zero

NEW YORK/BOSTON (Reuters) - U.S. stocks gained further and the U.S. dollar fell on Wednesday as investors reacted to the Federal Reserve’s decision to keep interest rates at ultra-low levels.

Slideshow ( 3 images )

The Fed repeated a pledge to use its “full range of tools” to support the U.S. economy and keep interest rates near zero for as long as it takes to recover from the fallout from the coronavirus outbreak.

“We have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” Fed Chair Jerome Powell told a news conference.

Stan Shipley, a macro research analyst with Evercore ISI in New York, said the Fed’s accommodative reaction to economic conditions was “pretty much as expected,” given all it has done already.

Investors must now watch to see if Congress will agree on how to continue its own support for the economy. U.S. President Donald Trump said on Wednesday that his administration and Democrats in Congress were still “far apart” on a new coronavirus relief bill.

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.84% following slight losses in Europe and broader declines in Asia.

Wall Street trading ended Wednesday broadly positive, as the Dow Jones Industrial Average .DJI rose 160.29 points, or 0.61%, to 26,539.57; the S&P 500 .SPX gained 40.01 points, or 1.24%, to 3,258.45; and the Nasdaq Composite .IXIC added 140.85 points, or 1.35%, to 10,542.94.

Among U.S. stocks to advance were Starbucks Corp SBUX.O, which saw its business "steadily recovering," and Advanced Micro Devices AMD.O, which surged after it raised its revenue forecast. Boeing BA.N shares fell after a bigger-than-expected loss.

Deaths from the novel coronavirus in the United States registered their biggest one-day increase since May on Tuesday, with this month’s spike in infections forcing some states to make a U-turn on reopening their economies.

Asia and Europe have also been hit by new surges in infections, with several countries imposing new restrictions and Britain imposing 14-day quarantines on travelers from Spain.

Traditional safe haven assets were mixed.

After a pause, the price of gold XAU= resumed its climb and added 0.4% to hit $1,966.80 an ounce.

Benchmark U.S. Treasury 10-year notes US10YT=RR rose 3/32 in price to yield 0.5724%, from 0.581% late on Tuesday.

The dollar index =USD fell 0.45% on inflation fears, among other factors, and the euro EUR= rose 0.56% to $1.178.

Oil prices climbed after a surprise drop in U.S. crude inventories was enough to offset concerns about U.S. fuel demand, though concerns about the record increases in COVID-19 infections kept gains in check.

U.S. crude CLc1 rose 0.56% to $41.27 per barrel and Brent LCOc1 was at $43.77, up 1.27% on the day.

Reporting by David Randall, Lawrence Delevingne and Ross Kerber; Editing by Nick Zieminski and Alistair Bell