Stocks turn higher after Fed raises rates

FILE-Federal Reserve Chair Janet Yellen speaks during a news conference in Washington, Wednesday, March 15, 2017. The Federal Reserve is raising its benchmark interest rate for the second time in three months and signaling that any further hikes this year will be gradual. (AP Photo/Susan Walsh)

NEW YORK (AP) — Stock prices are rising and bond yields are falling as traders react to the Federal Reserve’s plans to raise interest rates at a gradual pace this year.

High-dividend stocks like utilities and real estate companies did better than the rest of the market Wednesday. Financial stocks fell.

The dollar also moved lower against other currencies and gold prices rose, both signs that investors don’t expect U.S. interest rates to rise quickly this year.

The yield on the two-year Treasury note, which is particularly sensitive to changes in Fed policy, dropped to 1.32 percent from 1.38 percent.

In stock trading, the Standard & Poor’s 500 index rose 15 points, or 0.6 percent, to 2,380. It had been up through the day, and gains accelerated immediately after the Fed made its announcement.

The Federal Reserve will hike its key short-term rate, the third increase since December 2015 and a show of confidence in that the economy is stable. Steady hiring has brought down the unemployment rate to 4.7 percent, while the Fed’s preferred measure of inflation has been moving closer to the central bank’s preferred target of 2 percent.

By a 9 to 1 vote, Fed officials raised the federal funds rate 0.25 percentage points to a range of 0.75 to 1 percent. The Fed had cut during the 2008 financial crisis to a record low in order to help steady the economy and only gradually began to increase it at the end of 2015. Still, the Fed said in a statement that the federal funds rate — what banks charge each other for short-term loans — is low enough to encourage borrowing and investing that can bolster economic activity.

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