Stocks on Wall Street closed broadly higher Wednesday after the Federal Reserve signaled it may begin easing its extraordinary support measures for the economy later this year. The central bank indicated it may start raising its benchmark interest rate sometime next year, earlier than it envisioned three months ago. It also said it will likely begin slowing the pace of its monthly bond purchases “soon” if the economy keeps improving. The Fed’s been buying the bonds throughout the pandemic to help keep long-term interest rates low. The S&P 500 rose 1%, breaking a four-day losing streak. The benchmark index initially climbed 1.4% after the Fed issued its statement at 2 p.m. Eastern. The other major indexes also received a bump, but shed some of their gains by late afternoon. The Dow Jones Industrial Average rose 338.48 points, or 1%, to 34,258.32. The blue-chip index briefly surged 520 points higher. The Nasdaq composite gained 150.45 points, or 1%, to 14,896.85. Bond yields mostly rose. The yield on the 10-year Treasury note wobbled up and down after the Fed’s announcement, but wound up little changed at 1.31% from 1.32% late Tuesday. The yield influences interest rates on mortgages and other consumer loans. Wall Street analysts said the Fed’s policy update was in line with what the market was expecting. The VIX, which measures how much volatility investors expect for the S&P 500, sank about 14% after the Fed statement. “This was so well telegraphed that it didn’t take anybody by surprise,” said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management. At a news conference, Federal Reserve Chair Jerome Powell said the Fed plans to announce as early as November that it will start to taper its monthly bond purchases, should the job market maintain its steady improvement. The Fed’s shift revealed that inflation is starting to be a concern, said Gene Goldman, chief investment officer at Cetera Financial Group. “Our concern is that the Fed keeps sticking to its view that this is a transitory phase, but we aren’t seeing evidence that this is transitory,” he said. Goldman added that the broader market could be in for a correction as economic growth slows and rising inflation persists. “Our concerns about the overall economy and market is that number one, we’re at peak everything,” he said. Even with Wednesday’s rally, September has been a rough month for stocks. The S&P 500 is down 2.8%. The declines threaten to halt a streak of monthly gains that began in February. Wall Street has been trying to gauge how the slowdown in the economic recovery will affect the Fed’s decision-making process. The broader market has been choppy as that question lingers amid rising cases of COVID-19 because of the highly contagious delta variant and the impact of rising inflation on companies and consumers. History doesn’t offer a great guide for how markets will react to the Fed’s easing its support for the economy, mostly because it’s been such a rare occurrence. But the market’s movements around them can seem counterintuitive. Consider the summer of 2013, when Treasury yields jumped sharply after the Fed’s chair at the time hinted it may begin slowing its bond-buying program. Investors were taken by surprise and assumed rate increases would also quickly follow. That drove the yield on the […]

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