By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks gained Wednesday, with the Dow industrials erasing losses to end at an eight-month high after the Federal Reserve said interest rates would remain low through late 2014.
Apple Inc.’s stellar earnings bolstered the Nasdaq Composite throughout the day.
“I don’t think you’ll see a housing market recovery until 2015 or 2016, which in turn will force the Fed to keep interest rates low, because the American dream is built on home ownership,” said Jeremy Hare, managing director of investments at Gilford Securities.
“The U.S. consumer is really not dead, they are just purchasing things smartly that they want,” Hare added of Apple’s first-quarter earnings, which blew past estimates.
After falling as much as 95.63 points, the Dow Jones Industrial Average /quotes/zigman/627449 DJIA +1.69% ended at 12,756.96, up 81.21 points, or 0.6%. It was the index’s highest close since May 10.
Boeing Co. /quotes/zigman/220026/quotes/nls/ba BA +1.14% was among the Dow components reversing course, with the aerospace manufacturer shedding losses that came on its weaker-than-expected 2012 earnings forecast. Read more on Boeing earnings.
Apple earnings blow past estimates
Apple's iPhone sales come in at more than 37 million and profit more than doubles for its latest quarter, zooming past analysts' estimates. MarketWatch tech editor Dan Gallagher and Stacey Delo parse the numbers.
The S&P 500 Index /quotes/zigman/3870025 SPX +1.90% gained 11.41 points, or 0.9%, to 1,326.06, with utilities leading gains that included all of its 10 industry groups.
The index has closed lower only three sessions so far this year.
Up for a second session, the Nasdaq Composite /quotes/zigman/123127 COMP +2.00% rose 31.67 points, or 1.1%, to 2,818.31.
Apple /quotes/zigman/68270/quotes/nls/aapl AAPL +1.30% shares rallied 6.2% to $446.66 a share, a record high, after the globe’s largest tech company reported first-quarter earnings that more than doubled. Read more on Apple’s quarter.
For every share falling more than three gained on the New York Stock Exchange, where nearly 831 million shares traded. Composite volume topped 4.4 billion.
Reversing course
Stocks cleared their declines and Treasury prices extended gains after the central bank said economic conditions, including a “subdued outlook for inflation,” would likely warrant keeping the Fed’s benchmark rate at exceptionally low levels for longer than the central bank had previously projected.
Fed stands pat
No action from central bank that is more pessimistic on economy.
• Text of statement
• The Fed will act if jobless rate doesn’t drop (First Take)
• One Fed tool that gives Wall Street heartburn
• Why the Fed will look past rising food prices
• Bernanke doesn’t expect double-dip recession
• Highlights of the Fed minutes
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In addition to stating rates would remain near zero, the Fed also made the unprecedented move of setting an inflation target of 2%, which brings the U.S. central bank in line with other central banks around the globe.
The Fed’s decision “should provide a boost to growth. In theory, lower interest rates can boost mortgage refinancing, lift equity prices, and increase business investment while supporting vehicle and home sales,” noted Ryan Sweet, a senior economist at Moody’s Analytics. Read more on Fed statement.
“The equity market loves the stimulus, but if the Fed’s view is true, than I would think that equities, especially in the near term, will come crashing down to earth. If the Fed has missed the call, then today might offer some of the best value in the stock market in quite some time,” offered Kevin Giddis, a fixed-income analyst at Morgan Keegan. Read text of FOMC statement.
U.S. stocks had trended mostly lower ahead of the Fed as investors sorted through mixed corporate earnings.
”It is pretty much Apple on the plus side,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc., ahead of the Fed statement.
Wall Street’s action marks “more of a consolidation of the market, which is healthy, given the three weeks that were very positive to begin the year, so we’re having a little bit of a pause here,” Fitzpatrick said.
Also in the tech sector, disappointing outlooks from Advanced Micro Devices Inc. /quotes/zigman/216580/quotes/nls/amd AMD +3.02% and Nvidia Corp. /quotes/zigman/80597/quotes/nls/nvda NVDA +2.08% weighed.