US stocks rise as Fed gives cautious outlook

New York - Wall Street stocks climbed on Wednesday after the US Federal Reserve kept interest rates unchanged and offered an outlook on the US economy that was less bullish than many expected.

The Dow Jones Industrial Average rose 74.23 points (0.43%) to 17 325.76.

The broad-based S&P 500 climbed 11.29 (0.56%) to 2 027.22, while the tech-rich Nasdaq Composite Index gained 35.30 (0.75%) at 4 763.97.

In revisions to its December forecasts, the Fed's policy body, the Federal Open Market Committee (FOMC), said it expects the US economy to grow only 2.2% this year, compared with 2.4% previously.

Fed officials pulled back their expectations on rate increases in 2016 by about a half percentage point, seeing the benchmark federal funds rate at about 0.9% by the end of the year, implying two rate hikes. In December they had projected the key rate at 1.4% by end-2016, suggesting four hikes.

Bank shares down

Fed chair Janet Yellen, at a news conference following the two-day FOMC meeting, said the central bank took "a slightly more accommodative path", given "soft" US business investment and weak exports in recent months, and the global slowdown and turmoil in world markets.

Most analysts said the overall tone from the FOMC and Yellen was more dovish than expected. However, IHS said the "stage is set" for a possible rate hike in June.

Banking shares fell, with Bank of America shedding 1.9%, Citigroup 0.9% and Goldman Sachs 1%. Bank profits are boosted by higher rates.

Petroleum-linked shares advanced on a 5.8% rise in US oil prices. ConocoPhillips rose 5.1%, Halliburton 1.4% and EOG Resources 1.9%.

Other commodity-linked companies also gained. Aluminium producer Alcoa rose 6.3%, US Steel jumped 8.2% and Freeport-McMoRan 10.3%.

Peabody Energy, the largest US coal miner, plummeted 45.4% after it warned that it may be forced to seek bankruptcy protection after it missed a key debt payment.

Charter Communications rose 6% following a Wall Street Journal report that the US Federal Communications Commission is moving toward approving its $55bn purchase of Time Warner Cable with some conditions. Time Warner Cable gained 3.3%.

Oracle climbed 3.8% after the information technology company reported third-quarter earnings of 64c per share, 2c above expectations. Oracle also said its board had authorised up to $10bn in additional stock buybacks.