Investing.com -- U.S. stocks rose broadly on Wednesday after the Federal Reserve voted to maintain short-term interest rates at their current level, while cutting its forecast for future rate hikes in 2016.
On Wednesday afternoon, the Federal Open Market Committee (FOMC) held the Federal Funds Rate at a target range between 0.25% and 0.50%, leaving its benchmark interest unchanged for the second consecutive month. Citing increased global and economic and financial risks and a modest uptick in inflation, Fed chair Janet Yellen emphasized that conditions in the economy will likely warrant gradual interest rate hikes for the remainder of the year. Notably, the FOMC lowered its projections for future rate increases by 50 basis points for each of the next two years. The Fed now expects to raise interest rates twice in 2016, down considerably from December forecasts of four potential interest rate hikes this year.
Any rate hikes from the Fed this year are viewed as bearish for equities, as investors pile into bonds and U.S. Treasuries in an effort to capitalize on higher yields.
Yellen's comments provided a boost to the major indices late in the session, as the Dow Jones Industrial Average added 73.07 or 0.42% to 17,324.60. The Dow reversed territory following the release of the relatively dovish statement, gaining more than 125 points at session highs. With the gains, the Dow ended Wednesday's session at its highest closing level of 2016.
The NASDAQ Composite index gained 35.30 or 0.75% to 4,763.97, while the S&P 500 Composite index rose 11.35 or 0.56% to 2,027.32. On the S&P 500, nine of 10 sectors closed in the green, as stocks in the Energy, Basic Materials and Technology industries led. Stocks in Health Care sector lagged, ending the session as the lone industry in the red. While analysts largely expected little action from the Fed after the European Central Bank and the Bank of Japan held rates in negative territory over the last week, the Fed's decision to slash its rate outlook came as a mild surprise.
The top performer on the Dow was Caterpillar Inc (NYSE:CAT), which jumped 1.90 or 2.62% to 74.34. Shares in the world's largest manufacturer of mining and construction equipment moved higher, as commodities surged following the Fed's statement. The worst performer was Pfizer Inc (NYSE:PFE), which lost 0.50 or 1.69% to 29.04. Pfizer (NYSE:PFE) shares dipped on Wednesday, one day after the pharmaceutical giant reported that CEO Ian Read's total compensation fell by more than 20% last year.
The biggest gainer on the NASDAQ was Charter Communications Inc (NASDAQ:CHTR), which added 10.99 or 5.88% to 197.92. The worst performer was VRTX, which lost 3.85 or 4.65% to 78.98. Slumping pharmaceutical stocks continued to drag down the health care sector, as Alexion Pharmaceuticals Inc (NASDAQ:ALXN), Biomarin Pharmaceutical Inc (NASDAQ:BMRN) and Celgene Corporation (NASDAQ:CELG) were among the worst performers of the session.
The top performer on the S&P 500 was Freeport-McMoran Copper & Gold Inc (NYSE:FCX), which soared 0.97 or 10.46% to 10.24 as gold futures surged by more than $30 an ounce on Wednesday afternoon. Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in rising rate environments. The worst performer was Mallinckrodt (NYSE:MNK), which lost 3.05 or 5.13% to 56.46.
On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,513-604 margin.