US close: Stocks hit high as Fed eyes only two hikes in 2016

US stock indices closed at their highest level this year after the Federal Reserve held back from any change to interest rates and oil prices bounced back.

Rising 0.43% to finish at 17,325.76, the Dow Jones and the S&P 500, up 0.56% to 2,027.22, both completed their highest closes of 2016, while the Nasdaq was up 0.75% to 4,763.97, its highest level since the first week of January.

The Federal Open Markets Committee kept the target range for the fed funds rate unchanged but the decision was not unanimous, with hawkish Kansas Fed president Esther George a lone dissenter.

Nonetheless, the 'dot plot' interest rate projections submitted by the Fed's policymakers revealed that they now only anticipated two further interest rate hikes in 2016, versus as many as four at the end of last year.

The Committee still expects to raise rates four times next year on the assumption that headwinds from abroad will abate.

With read GDP forecasts trimmed for 2016 and 2017, the Fed acknowledged the softness in business investment, which in her press conference chairwoman Janet Yellen attributed to low oil prices.

With the unemployment forecasts reduced for 2017 and 2018, the FOMC is confident that inflation will move back to target in the next two or three years.

As well as boosting stocks, 10-year US treasury yields fell below 1.92% and the EUR/USD exchange rate climbed above 1.12.

"George’s dissent suggests that the hawks are getting impatient and have started pushing for a rate hike," noted analysts at Rabobank.

"Although Yellen said that April is a live meeting, we doubt that the doves will be ready for a rate hike within the next six weeks. However, by June there may very well be a majority for a hike."

Earlier, the US consumer price index showed a 1.0% increase in February from a year ago, beating forecasts for a 0.9% increase, down from January’s 1.4% year-on-year gain.

On the month, CPI fell 0.2% in February as expected, compared to 0% month-on-month in January.

At the ‘core’ level, stripping out food and energy prices, CPI rose by 0.3% month-on-month (consensus: 0.2%) and by 2.3% versus a year ago (consensus: 2.2%).

This followed January's rise in the core personal consumption expenditure (PCE) measure of inflation to 1.7%, close to the Fed's 2% target. However, in its new projections core PCE inflation at end-2016 has remained unchanged at 1.6%, baffling economists.

Pantheon Macroeconomics questioned the Fed's taking action predicated on this "breathtaking" assumption: "This just makes no sense at all. Core PCE inflation is accelerating, following the surge in core CPI, and we expect it to breach the 2% target by the fall, if not sooner," said chief economist Ian Shepherdson.

"The Fed expects only a very gradual glidepath to 2% by end-2018. In short wishful thinking appears to have taken the place of reality-based forecasting."

Capital Economics agreed that Fed officials seemed to be placing "too much importance" on the apparent decline in inflation expectations.

Oil prices were lifted as reports emerged that major producers would meet to discuss a potential slowing of output.

Qatari oil minister Mohammed Bin Saleh Al-Sada said that producers from and outside the Organization of the Petroleum Exporting Countries will meet on 17 April in Qatar to discuss proposals to address the supply glut.

The US Energy Information Administration also revealed an increase in crude stockpiles of 1.3m barrels in the US last week, below the expected 3.4m build.

West Texas Intermediate jumped 5.9% to $38.50 per barrel and Brent crude increased 4.0% to $40.28 after equity markets had closed in New York.

In company news, Peabody Energy tanked after saying it may not have enough liquidity to continue operating.

Chipotle Mexican Grill was also in the red after it forecast a first quarter net loss.

On the upside, software firm Oracle Corp rose after its third-quarter results beat analysts’ expectations.

S&P 500 - Risers
Freeport-McMoRan Inc (FCX) $10.22 +10.25%
Southwestern Energy Co. (SWN) $7.90 +9.27%
Devon Energy Corp. (DVN) $26.22 +8.84%
United States Steel Corp. (X) $15.45 +8.19%
Williams Companies Inc. (WMB) $17.44 +7.99%
ONEOK Inc. (OKE) $29.51 +6.46%
Alcoa Inc. (AA) $9.74 +6.33%
Newfield Exploration Co (NFX) $33.49 +5.18%
ConocoPhillips (COP) $41.87 +5.12%
Range Resources Corp. (RRC) $33.44 +5.06%

S&P 500 - Fallers
Peabody Energy Corp. (BTU) $2.19 -45.39%
Fossil Group Inc (FOSL) $44.62 -4.76%
Vertex Pharmaceuticals Inc. (VRTX) $79.30 -4.26%
Allergan plc (AGN) $272.76 -3.62%
Charles Schwab Corp. (SCHW) $26.92 -2.96%
Alexion Pharmaceuticals Inc. (ALXN) $130.84 -2.68%
Rowan Companies plc (RDC) $16.25 -2.34%
Fifth Third Bancorp (FITB) $16.84 -2.04%
Bank of America Corp. (BAC) $13.31 -1.92%
Huntington Bancshares Inc. (HBAN) $9.48 -1.86%

Dow Jones I.A - Risers
Caterpillar Inc. (CAT) $74.34 +2.62%
Microsoft Corp. (MSFT) $54.35 +1.42%
Apple Inc. (AAPL) $105.97 +1.33%
International Business Machines Corp. (IBM) $144.79 +1.28%
United Technologies Corp. (UTX) $97.49 +1.25%
Chevron Corp. (CVX) $95.40 +1.20%
Verizon Communications Inc. (VZ) $53.21 +1.03%
Boeing Co. (BA) $127.57 +0.96%
Cisco Systems Inc. (CSCO) $27.88 +0.80%
American Express Co. (AXP) $59.70 +0.79%

Dow Jones I.A - Fallers
Pfizer Inc. (PFE) $29.04 -1.69%
Goldman Sachs Group Inc. (GS) $150.54 -0.98%
Merck & Co. Inc. (MRK) $51.94 -0.92%
JP Morgan Chase & Co. (JPM) $58.92 -0.47%
Coca-Cola Co. (KO) $45.05 -0.42%
General Electric Co. (GE) $30.17 -0.36%
Johnson & Johnson (JNJ) $107.41 -0.32%
Wal-Mart Stores Inc. (WMT) $67.99 -0.15%

Nasdaq 100 - Risers
Charter Communications Inc. (CHTR) $198.16 +6.01%
Ctrip.Com International Ltd. Ads (CTRP) $42.61 +4.54%
Endo International Plc (ENDP) $33.91 +4.11%
Viacom Inc. Class B (VIAB) $40.26 +3.71%
Vimpelcom Ltd Ads (VIP) $3.97 +3.66%
Liberty Global plc Series A (LBTYA) $37.59 +3.53%
Liberty Global plc Series C (LBTYK) $36.76 +3.46%
Discovery Communications Inc. Class A (DISCA) $28.55 +3.22%
Monster Beverage Corp (MNST) $136.18 +3.18%
Nvidia Corp. (NVDA) $33.10 +2.99%

Nasdaq 100 - Fallers
Vertex Pharmaceuticals Inc. (VRTX) $79.30 -4.26%
Biomarin Pharmaceutical Inc. (BMRN) $80.34 -3.70%
Incyte Corp. (INCY) $63.77 -2.85%
Alexion Pharmaceuticals Inc. (ALXN) $130.84 -2.68%
Micron Technology Inc. (MU) $10.72 -1.20%
QUALCOMM Inc. (QCOM) $51.30 -0.64%
Tractor Supply Company (TSCO) $89.56 -0.59%
Illumina Inc. (ILMN) $149.20 -0.52%
Amazon.Com Inc. (AMZN) $574.27 -0.48%
Celgene Corp. (CELG) $97.53 -0.46%