Stocks rallied Wednesday, rebounding from a dismal past three months, after the Federal Reserve kept interest rates unchanged for a second consecutive time — leading investors to think the central bank would stay put for the rest of the year.
The Dow Jones Industrial Average advanced 221.71 points, or 0.67%, to 33,274.58. The S&P 500 climbed 1.05% to 4,237.86, briefly crossing its 200-day moving average. The Nasdaq Composite added 1.64% to 13,061.47.
Information technology stocks outperformed, gaining about 2%. Semiconductor companies Advanced Micro Devices and Micron Technology added 9.7% and 3.8%, respectively. Nvidia shares were higher by more than 3%.
The Fed kept rates in a range of 5.25% to 5.5%, as was widely expected. The central bank also said "economic activity expanded at a strong pace in the third quarter." In previous remarks, it noted the economy was growing at a "solid pace."
"Given the recent rise in yields, the Fed is less likely to raise rates in December, with the possibility of raising them later to keep reducing inflation," said Damanick Dantes, portfolio strategist at Global X. "Tighter financial conditions since the September FOMC meeting have partially achieved the Fed's goals."
However, Fed Chair Jerome Powell at the post-decision press conference would not rule out a hike next month, saying that the idea that it would be difficult to raise rates after pausing for two meetings was wrong.
Bond yields slid following the rate decision and after the Treasury shared its bond sale plans, boosting equities. The 10-year Treasury yield fell below the 4.8% level on Wednesday, after a move above 5% in October that spooked markets. Meanwhile, the 2-year Treasury yield dipped under 5%.
Treasury sale plans, fresh data
Earlier in the session, the Treasury detailed plans of the size of its future bond sales amid growing concerns of the U.S. government's rising debt load. Next week, the Treasury will auction $112 billion in debt, largely matching what Wall Street was expecting.
Investors absorbed other economic data that came out Wednesday morning showed signs of cooling in the economy and labor market. The ISM manufacturing index showed manufacturing activity contracted more than expected in October.
Wall Street is coming off a dismal October, fueled in part by worries over rapidly rising yields. The Dow and the S&P 500 ended the month lower by 1.4% and 2.2%, respectively, marking the first three-month losing streak for both indexes since March 2020. Notably, the S&P 500 temporarily fell into correction territory. The Nasdaq Composite dropped 2.8% in October, also falling for a third straight month.
Last month, the 10-year U.S. Treasury yield hit a 16-year high as investors feared the Fed would keep interest rates higher for longer.
— CNBC's Jeff Cox and Alex Harring contributed to this report.
