Stocks extended gains Wednesday after the Federal Reserve offered few clues on when it plans to raise interest rates for the first time in nearly a decade.
The Dow Jones Industrial Average advanced 115 points, or 0.7%, to 17745. The S&P 500 rose 0.7% and the Nasdaq Composite added 0.4%.
The Fed decided to leave its benchmark interest rate near zero, as expected. The central bank cited progress in the U.S. labor market, a sign it remains on course to raise rates at some point this year, but also flagged a continued concern about low inflation, which could give some officials pause.
Stocks have rallied since the financial crisis, driven in part by the Fed's easy money policy. Many investors say returns on stocks will remain more appealing than returns on other assets, such as bonds, if interest rates stay lower for longer.
"There was nothing in there where the Fed clarified that it would be raising rates in September," said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, which oversees about $27 billion.
That gave stocks some relief on Wednesday. But Mr. Donabedian said the exact timing of the first increase in rates shouldn't be as important in the longer run. "If an impending issue has ever had time to be priced into the market, this is it," he said.
While uncertainty around the timing of the first rate increase could prompt stock swings, many investors say the market should be able to withstand the first few rate increases as the overall level of rates is expected to remain low.
"Is going from zero to a quarter percentage point going to kill the economy?" said Keith Bliss, senior vice president at brokerage Cuttone & Co. " If it does, we've got bigger issues," he added.
The Fed sounded a positive note on the U.S. economy Wednesday, such as using the word "solid" to describe gains in the labor market, said Jim Paulsen, chief investment strategist at Wells Capital Management.
"Without saying it, the Fed really put the onus on next Friday," Mr. Paulsen said, referring to the July jobs report. A good report in terms of unemployment, jobs growth and wage inflation will likely move more of the market to thinking the Fed will start raising rates in September, he said.
"We may pretty much know by a week from Friday what's going to happen, and there could be lots of fireworks long before the Fed starts tightening," he said, adding that while he wouldn't do anything "drastic" to portfolios, moving some money along to the margins wouldn't hurt.
On the other side of the Atlantic, the Stoxx Europe 600 closed up 1%, building on Tuesday's 1.1% gain. The gains in U.S. and European stocks followed a rebound in Chinese shares after a three-day slump that knocked 11% off the value of China's main stock index.
A handful of upbeat corporate reports also lifted stocks Wednesday.
Gilead Sciences Inc. said Tuesday afternoon its two key hepatitis C drugs generated about $4.9 billion in sales in the second quarter, topping Wall Street estimates. The company again raised its guidance for net product sales for the year. Shares rose 2.6%.
Also after the bell Tuesday, Citrix Systems Inc. reported better-than-expected earnings for the second quarter and raised its outlook for the year. The company said its chief executive planned to retire. Shares rose 7.7%.
Anthem Inc. said Wednesday its revenue rose 8.4% in its second quarter, beating expectations, and the insurer bumped up its full-year guidance for medical enrollment growth. Shares added 0.5%.
Meanwhile, Twitter Inc. said late Tuesday its second-quarter revenue rose 61%, outpacing expectations. Still, the company remains unprofitable and showed almost no growth in its core users. Shares dropped 14%.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com and Josie Cox at josie.cox@wsj.com
(END) Dow Jones Newswires
July 29, 2015 15:32 ET (19:32 GMT)
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