US Fed rates rise: Stocks rally on Wall St

Wall Street has reacted positively to the first rise in US interest rates in nine years.

Immediately after the mid-afternoon announcement, the Dow Jones Industrial Average rose 185 points, or 1.1%, to 17,710.

Share prices continued to rise during the late afternoon session and the Dow closed near its highs, up 224.18 points, or 1.3%, to 17,749.09. It was the 11th largest volume day of the year, with nearly 8.5 billion shares trading.

The S&P 500 advanced 29.66, or 1.5%, to 2073.07 and the Nasdaq Composite gained 75.77 points, or 1.5%, to 5071.13.

The Fed’s policy of ultralow rates has helped propel the stocks higher since the global financial crisis of 2008-09.

But the need for change was also widely acknowledged as the distortionary effects of zero returns on cash weighed on investment decisions.

Many investors say stocks can continue to advance even after the Fed begins to lift rates, since it underscores the central bank’s confidence in the economy.

“There’s been a tremendous amount of healing in this country,” Michael Scanlon, portfolio manager at John Hancock Asset Management, told the Wall Street Journal.

“In my opinion, the economy is strong enough to handle higher rates.”

He expects a better backdrop for corporate earnings next year, which bodes well for stock-market gains.

The US dollar fell against the euro and the yen. US government bonds strengthened, pushing yields lower, as Fed officials pointed to a gradual path of future rate increases.

Stocks that tend to pay out high dividends, which had rallied in recent years amid low interest rates, led the S&P 500 higher after the Fed decision.

Oil prices slumped 4.9% to $US35.52 a barrel in New York trading, snapping a two-day rebound, after an unexpected surge in US crude supplies.

Gold rose 1.4% to $US1078.00 an ounce.

Earlier, stocks in Europe and Asia rallied ahead of the Fed decision.

The Stoxx Europe 600 rose 0.2% after rallying 2.9% on Tuesday, its largest gain in more than two months.

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