Wall Street recovers after Fed keeps rates steady

By Noel Randewich

(Reuters) - Wall Street cut losses on Wednesday after Federal Reserve left interest rates unchanged but opened the door to a resumption of monetary policy tightening this year.

The Fed had not been expected to move interest rates at its two-day meeting but investors have been anxious for hints about when a hike might come following concerns about potential fallout from Britain's vote in June to leave the European Union.

The U.S. central bank indicated less worry about possible shocks that could push the U.S. economy off course and noted that inflation expectations were little changed in recent months.

"It sounded a reasonably upbeat tone, not a big difference from last time, but a reasonably upbeat tone," said Kathy Jones, chief fixed-income strategist at Charles Schwab and Co in New York.

 

Major stock indexes reversed losses following the announcement.

At 2:19 p.m. (1819 GMT), the Dow Jones industrial average <.DJI> was up 36.22 points, or 0.2 percent, to 18,509.97, the S&P 500 <.SPX> had lost 0.12 point, or 0.01 percent, to 2,169.06.

The Nasdaq Composite <.IXIC> had added 27.61 points, or 0.54 percent, to 5,137.66.

Dow component Coke's revenue miss and forecast cut sent its stock down 3.6 percent, pulling down the S&P 500 index.

In contrast, Apple shares rose 7.2 percent after the company sold more iPhones than expected in the third quarter and gave an upbeat current-quarter forecast.

Oil prices tumbled 3 percent after the U.S. government reported a surprise build in crude and gasoline inventories. [O/R]

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by James Dalgleish)