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U.S. markets jump, dollar falls on Fed minutes

Traders work on the floor of the New York Stock Exchange October 1, 2014. REUTERS/Brendan McDermid

By Yasmeen Abutaleb

NEW YORK (Reuters) - U.S. stocks soared and the dollar fell on Wednesday on a wave of investor relief after the Federal Reserve said it does not plan to hike interest rates before the economy can support an increase.

The Fed, in minutes from its mid-September meeting released on Wednesday, said that some participants wanted to err on the side of patience to keep supporting the world's largest economy for longer than expected. The less aggressive posture lit a fire under U.S. stocks, which have struggled in recent days, and helped drive the S&P to its best one-day gain in nearly a year (DJc1)(SPc1).

But with further signs that the world economy is continuing to struggle, some investors were doubtful the gains can continue on support from aggressive global central bank policy. Data and forecasts out of China, Spain and Germany this week indicated economic weakness.

"If at the end of the day what we are left with is slowing global growth and ongoing expansive monetary policies, it is doubtful that today's equity bounce can be sustained," said David Joy, chief market strategist at Ameriprise Financial in Boston.

The dollar fell to a two-week low against the euro and declined against the yen following the release of the Fed minutes. The Fed said a strong dollar could hurt some parts of the economy and slow the rise of inflation. The dollar has been strong of late as investors have seen the Fed moving to raise interest rates before other major central banks.

The pan-European FTSEurofirst 300 (.FTEU3) index ended down 0.8 percent, its lowest level in nearly two months. Japan's Nikkei 225 index ended down 1.2 percent.

The price of oil hit a two-year low, with Brent crude oil (LCOc1) at $91.77, after dipping below $91 a barrel earlier in the session, its lowest level since June 2012. U.S. November crude (CLc1) was down at $87.79 a barrel, the lowest level since April 2013.

The fall in the price of oil could boost consumer spending as it reduces fuel costs heading into winter, but also serves as an indication of weaker demand.

The Dow Jones industrial average (.DJI) rose 274.83 points, or 1.64 percent, to 16,994.22, the S&P 500 (.SPX) gained 33.79 points, or 1.75 percent, to 1,968.89, and the Nasdaq Composite (.IXIC) added 83.39 points, or 1.9 percent, to 4,468.59.

U.S. Treasuries rose following the release of the Fed minutes after having fallen earlier. Benchmark 10-year U.S. Treasury notes were up 10/32 in price to yield 2.3142 percent, the lowest level since June 2013.

The dollar index (.DXY), which tracks the greenback against six major currencies, slipped for a third consecutive session, down 0.5 percent at 85.250.

Against the yen, the dollar was up 0.06 percent at 108.08 yen (JPY=). The euro was up 0.55 percent against the dollar at $1.2738 (EUR=).

Growth in China's services sector weakened slightly in September as new business cooled, a private survey showed on Wednesday, reinforcing signs of a slowdown in the world's second-largest economy that could prompt more stimulus measures.

Figures out of Germany this week have called into question growth in the euro zone's biggest and most robust economy. Meanwhile, Spain's industrial output grew at its slowest pace since a year ago.

(Additional reporting by Herb Lash; Editing by Leslie Adler)