By Ryan Vlastelica
NEW YORK (Reuters) - Stock markets around the world rallied on Thursday, while the U.S. dollar fell, a day after the Federal Reserve signalled that interest rates would rise more slowly than many had expected.
An unconfirmed report that aid for Greece would be extended until the end of the year, possibly averting a default, eased concern over the region and returned European equities to positive territory. U.S. stocks hit session highs after the report, and the Nasdaq set a new intraday record, breaking one that had held since March 2000.
On Wednesday, the Fed said that the economy was probably strong enough to support a rate increase this year. But it lowered its forecasts for 2015 growth and reduced its federal funds rate forecast.
Analysts are torn on whether the first rate hike in nearly a decade will come in September or December, but the comments indicated that no matter when the first one occurred, the move would not be aggressive.
"Gradualism for rate increases is a soothing message for the market," said Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Investments in Atlanta. "September remains on the table, but the downward drift in the forecasts for next year means the increases will happen gradually, and that's a relief for investors."
The Dow Jones industrial average rose 209.93 points, or 1.17 percent, to 18,145.67, the S&P 500 gained 22.4 points, or 1.07 percent, to 2,122.84 and the Nasdaq Composite added 69.92 points, or 1.38 percent, to 5,134.80.
The benchmark 10-year U.S. Treasury note fell 18/32 in price, pushing the yield up to 2.3722 percent. The U.S. dollar index, which measures the greenback against a basket of currencies, fell 0.3 percent. The dollar fell 0.3 percent against the yen.
Without citing sources, Germany's Die Zeit reported that Greece's creditors plan to offer to extend its existing aid program until the end of this year, but without the participation of the International Monetary Fund.
The report comes after the IMF dashed any hope that Greece could avert default if it fails to repay a 1.6 billion euro loan by the end of June, piling pressure on leftist Prime Minister Alexis Tsipras.
"Greece is the best drama on TV right now, and we put the odds of a successful resolution at no better than a coin toss," Gayle said. "Clearly this has the potential to really increase near-term volatility."
The MSCI International ACWI Price Index rose 1 percent on the day while the pan-European FTSEurofirst 300 index rose 0.2 percent, erasing earlier losses. The euro rose 0.4 percent.
Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, while Japan's Nikkei skidded 1.1 percent to a one-week low as the yen gained against the dollar.
In commodities, oil rose on the back of the weaker dollar. Brent crude rose 0.7 percent to $64.32 a barrel and U.S. crude rose 0.8 percent to $60.42.
Spot gold prices popped 1.2 percent while silver was up 0.4 percent. Copper rose 0.1 percent, snapping its fourth straight daily decline.
(Editing by Nick Zieminski)
