Stocks rose to record highs and yields on longer-maturity U.S. debt retreated from more than one-year highs after the Federal Reserve continued to project near-zero interest rates at least through 2023 despite rising inflation concerns.

The yield on the benchmark 10-year note retreated from its highs of the day as Fed Chairman Jerome Powell reiterated that the central bank wants to see inflation moderately above 2 per cent and said the recent move higher in yields wasn’t disorderly. The S&P 500 climbed to the highest level on record, led by the consumer discretionary, industrial and materials sectors. The Dow Jones Industrial Average also closed at an all-time high.

“Overall, a big sigh of relief for equities since interest rates are still likely to remain near zero for an extended period, despite the massive double stimulus from the Fed and Congress,” said Mike Bailey, director of research at FBB Capital Partners.

Expectations of a strong recovery from the COVID-19 slump had put an intense focus on Fed officials’ projections for interest rates displayed in their “dot plot.” The central bank raised its economic outlook.

Seven of 18 officials predicted higher rates by the end of 2023 compared with five of 17 at the December meeting, showing a slightly larger group who see an earlier start than peers to the withdrawal of ultra-easy monetary policy, according to the FOMC’s quarterly economic projections also issued Wednesday.

“The Fed was dovish relative to some fears of ‘hawkish dots’, but since we didn’t get that ‘hawkish’ outcome, stocks are having a relief move,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI. “Bottom line, the inflation/growth forecasts the Fed has along with no rate hikes for three years is a positive backdrop for risk assets.”

The yield on 30-year Treasuries had spiked to a level unseen since 2019 and the 10-year hit 1.69 per cent. Market-implied inflation expectations were at 12-year highs. The dollar weakened versus most major peers.

Elsewhere, the Stoxx Europe 600 Index fell, and South Korean stocks retreated as Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance” in semiconductors globally.

WTI crude oil was little changed with the International Energy Agency saying markets aren’t on the verge of a new price supercycle. Bitcoin climbed off the lows of the day and back toward the weekend record of above US$61,000.

These are some key events this week:

Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.
Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.

These are the main moves in markets:

Stocks

The S&P 500 Index gained 0.3 per cent to 3,974.16 as of 4:01 p.m. New York time, the highest on record.

The Dow Jones Industrial Average jumped 0.6 per cent to 33,016.16, the highest on record.

The Nasdaq Composite Index climbed 0.4 per cent to 13,525.20, the highest in more than two weeks.

The Nasdaq 100 Index advanced 0.4 per cent to 13,202.38, the highest in more than two weeks.

The Stoxx Europe 600 Index declined 0.4 per cent to 424.91, the largest drop in more than a week.

Currencies

The Bloomberg Dollar Spot Index fell 0.5 per cent to 1,134.14, the lowest in more than two weeks.

The euro jumped 0.6 per cent to US$1.1976, the largest climb in almost six weeks.

The British pound jumped 0.5 per cent to US$1.3963, the biggest increase in almost four weeks.

The Japanese yen strengthened 0.1 per cent to 108.89 per dollar.

Bonds

The yield on two-year Treasuries dipped one basis point to 0.14 per cent, the lowest in more than two weeks on the biggest dip in almost three weeks.

The yield on 10-year Treasuries advanced two basis points to 1.64 per cent, the highest in more than 13 months.

The yield on 30-year Treasuries climbed three basis points to 2.41 per cent, the highest in 16 months.

Germany’s 10-year yield gained five basis points to -0.29 per cent, the highest in more than a week on the largest climb in two weeks.

Commodities

West Texas Intermediate crude declined 0.4 per cent to US$64.57 a barrel, the lowest in a week.

Gold strengthened 0.8 per cent to US$1,745.72 an ounce, the highest in almost three weeks on the largest gain in more than a week.

--With assistance from David Wilson.