US open: Stocks gain as traders weigh Fed policy decision

US stocks were in the green on Thursday as traders continued to digest the Federal Reserve’s decision to leave interest rates unchanged.

At 1448 BST the Dow Jones Industrial Average rose 0.81% to 18,442.76 points, the S&P 500 increased 0.71% to 2,178.39 points and the Nasdaq edged up 0.58% to 5,326.03 points.

At the same time, oil prices jumped after official data on Wednesday showed a surprise drop in US crude inventories last week. West Texas Intermediate crude gained 2.2% to $46.37 per barrel and Brent rose 1.8% to $47.69 per barrel.

The Federal Open Market Committee on Wednesday decided to keep interest rates unchanged at between 0.25% and 0.50% and cut the number of rate increases they expect this year from one to two.

The Fed was split in its decision to leave interest rates unchanged with three members dissenting in favour of an immediate 25 basis point hike.

The FOMC also signalled that the case for a hike later this year has strengthened, saying inflation was on track to reach the 2% target and near-term risks were “balanced”.

Goldman Sachs said its US economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures.

Meanwhile, Societe Generale said: “The outcome of the September FOMC meeting was in line with our expectations, as the Committee reintroduced the balance of risks statement, removed a rate hike this year and in 2017, and cut the longer-run nominal neutral funds rate.

“In our view, the reintroduction of the balance of the risks statement was a way to bridge the divide between the hawks and doves on the Committee, and it took the Fed a step further towards raising the funds rate in December.”

In economic data, US jobless claims fell for an 81st consecutive week last week. Initial jobless claims dropped by 8,000 to 252,000, the Labor Department said, compared to economists’ estimates of 261,000.

US house price rose 0.5% in July following a 0.2% increase in June, according to the monthly house price index by the Federal Housing Finance Agency. Analysts had expected a 0.3% increase.

Separately, US existing home sales fell 0.9% to an annual rate of 5.33 million units in August, the National Association of Realtors said, compared to forecasts for a 1.1% increase. July’s sales were also revised lower to 5.38 million units from a previously reported 5.39 million.

The Chicago Fed National Activity Index fell to negative 0.55 in August compared with a revised 0.24 in July and forecasts of 0.15.

In corporate news, shares in Bed Bath & Beyond gained even as the company reported quarterly earnings that fell short of analysts’ estimates.

Red Hat Inc. rallied after the software company posted quarterly results late Wednesday that beat forecasts.