Wall St rebounds as Fed promise soothes

NEW YORK,  (Reuters) – U.S. stocks clawed back most of  Monday’s losses as a U.S. Federal Reserve promise of at least  two more years of near-zero interest rates overshadowed its  warning about slowing economic growth.

The Fed’s statement gave markets a glimmer of hope, with  stocks’ gains accelerating into today’s close.

In a sign investors were not entirely convinced of the  Fed’s ability to stave off another recession, they sought safer  bets, including the Swiss franc and gold. Gold pared its early  gain to record levels but was still up about 1 percent at just  above $1,728 an ounce.

But Wall Street still almost reversed yesterday’s meltdown —  the steepest fall in nearly three years. However, the S&P 500  is down 14 percent from its April peak, with the bulk of  selling coming after a downgrade to U.S. debt and festering  concern about the euro zone’s inability to solve its own  persistent credit problems.

MSCI’s all-country world stock index rose 2.1 percent.

Short-term Treasury bond yields hit record lows as  investors speculated that the central bank would soon return to  the bond market, little more than a month after the end of its  last big program of purchases.

The Fed said it would keep its existing monetary stimulus  on track and offered a long two-year timeframe for rates to  stay low. Although it offered no new monetary initiatives, it  said it was prepared to do more if necessary.

“It’s basically giving more credence to the fact that they  are going to be accommodative for a much longer period of time,  which in general has been a positive for equities,” said  Mohannad Aama, managing director at Beam Capital Management  LLC, a hedge fund in New York.

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