Investing.com - U.S. stocks shot up on Wednesday after the Federal Reserve said it would be patient when deciding when to hike interest rates, with firming oil prices giving stocks a shot in the arm as well.
At the close of U.S. trading, the Dow 30 rose 1.69%, the S&P 500 index rose 2.04%, while the Nasdaq Composite index rose 2.12%.
The S&P 500 VIX index, which measures the outlook for market volatility, was down 17.52% at 19.44.
The Federal Reserve said earlier it was leaving its benchmark interest rate unchanged at 0.00-0.25% and added it will exercise patience when raising interest rates to make sure the economy continues to improve.
In past statements, the Fed said it would take "considerable time" to make sure recovery is underway before tightening policy.
In Wednesday's statement, the Fed left in the dovish phrase, though the context of the language suggested that the "considerable time" wordage applied to past statements, leaving markets to conclude that rate hikes are on the way though monetary authorities will be "patient" when acting.
"Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the Fed said in its statement, referring to its monthly bond-buying stimulus programs it ended in October.
"However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated."
The Fed's language fueled a rally on Wall Street by boosting hopes that borrowing costs will remain low for some time to come while economic fundamentals continue to improve and bolster top and bottom lines.
Elsewhere, higher oil prices boosted stocks as well, energy companies especially.
The U.S. Energy Information Administration said in its weekly report earlier that U.S. crude oil inventories fell by 0.847 million barrels in the week ending Dec, 12, and while short of expectations for a decline of 2.36 million barrels, markets applauded news of a draw a day after industry data rattled nerves.
The American Petroleum Institute on Tuesday reported an unexpected 1.9 million barrel increase in U.S. oil stockpiles, which investors later branded as an anomaly.
Stocks have tracked oil prices in recent sessions due to concerns that ample supply notwithstanding, falling crude futures may reflect a cooling global economy as well.
Leading Dow Jones Industrial Average performers included Chevron Corporation (NYSE:CVX), up 4.25%, UnitedHealth Group Incorporated (NYSE:UNH), up 3.43%, and McDonald's Corporation (NYSE:MCD), up 3.30%.
The Dow Jones Industrial Average's worst performers included International Business Machines (NYSE:IBM), which was up 0.34%, Caterpillar Inc (NYSE:CAT), up 0.46%, and United Technologies Corporation (NYSE:UTX), up 0.59%.
European indices, meanwhile, ended the day largely higher.
After the close of European trade, the Euro Stoxx 50 rose 0.07%, France's CAC 40 rose 0.46%, while Germany's DAX 30 fell 0.20%. Meanwhile, in the U.K. the FTSE 100 rose 0.07%.
On Thursday, the U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.