Fed expects economic gains to prompt gradual rate hikes

Fed expects economic gains to prompt gradual rate hikes

Fed expects economic gains to prompt gradual rate hikes

By 9:40 a.m. ET, the Dow Jones Industrial Average had gained 214.51 points, or 0.87 percent, at 25,012.29 and the S&P 500 rose 0.77 percent to 2,722.25.

Gains in technology and industrial shares helped US stocks rebound from a two-day fall on Thursday as investors shrugged off the prospects of more interest rate hikes this year.

"I anticipate further gradual increases in the policy rate will be appropriate to both sustain a healthy labor market and stabilize inflation around our 2 percent objective", Fed Governor Randal Quarles said in remarks prepared for delivery to the Institute for International Monetary Affairs in Tokyo.

All the 11 major S&P sectors were higher, led by a 1.5 percent gain in the telecom services index and a 0.9 percent rise in the energy index.

The gold rose after the publication of the Fed's meeting minutes.

The US Federal Reserve's rate-setting committee showed more confidence in the need to keep raising interest rates at its last policy meeting.

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However, comments from St Louis Fed President James Bullard earlier in the day appeared to have eased some of those concerns and the benchmark 10-year U.S. Treasury yields retreated from the more than four-year highs they hit on Wednesday.

A jump in these two gauges to multi-year highs were at the center of the selloff in equities earlier in the month. That prompted some investors to boost the chance of faster rate hikes. When Powell's appointment was first confirmed, stocks and bonds headed higher on the common view that he was a "safe pair of hands" and most likely to continue the policy pursued by Yellen.

Doug Cote, chief market strategist at Voya Investment Management, said strong corporate earnings, healthy readings of manufacturing justify an upbeat outlook for stocks and bond yields rising off ultralow levels. Growth has risen to an annual 3%, the U.S. is near full employment with the jobless rate down to 4.1% and Trump's tax cuts have boosted corporate profits and workers' pay. At the same time, good jobless data suddenly became a portent of revived inflation that would drive interest rates up even faster and more sharply.

Mester has said she thinks policymakers should raise rates three to four times this year and next. "That would probably be positive for the dollar", Gittler said. Shares of General Mills were off 3.7%. The stock was also the best performer in the S&P 500.

Xcerra Corp (NASDAQ:XCRA) lost 2.16% in pre-market trading after the company announced plans to call off its US$580mln sale to a Chinese group, blaming difficulty in securing federal approval. The company's shares were down 0.5%.

European stocks were trying to tip higher along with USA equities (http://www.marketwatch.com/story/european-stocks-struggle-to-find-impetus-to-follow-us-lead-higher-2018-02-23), while Asian stocks rebounded (http://www.marketwatch.com/story/asian-stocks-slide-following-wall-street-selloff-2018-02-21) to mark a second-straight week of gains.

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