By Angela Moon
NEW YORK (Reuters) - U.S. stocks edged higher on Wednesday after the Federal Reserve hinted at a slightly faster pace of interest-rate increases starting next year, but suggested that rates in the long run would be lower than the central bank had previously indicated.
The Fed, after a two-day policy meeting, slashed its forecast for U.S. economic growth this year but expressed confidence that the recovery was largely on track. The U.S. central bank cut the 2014 economic growth forecast to a range of between 2.1 percent and 2.3 percent from around 2.9 percent. The Fed also cut its monthly bond purchases to $35 billion a month, a reduction of $10 billion, as widely expected, in connection with its plans to wind down one of its main stimulus programs by the end of the year.
"The decision confirms that a steady-as-she-goes Federal Reserve will complete its quantitative easing exit later this year, but still have to rely more on forward policy guidance due to remaining growth and jobs challenges," said Mohamed El-Erian, chief economic adviser at Allianz SE in Newport Beach, California.
"Remaining growth and jobs challenges involve achieving economic lift-off that materially reduces long-term unemployment," El-Erian added.
The three major U.S. stock indexes, which had traded flat for most of the day, edged slightly higher following the Fed statement.
The Dow Jones industrial average rose 17.16 points or 0.10 percent, to 16,825.65. The S&P 500 gained 5.17 points or 0.27 percent, to 1,947.16. The Nasdaq Composite added 3.31 points or 0.08 percent, to 4,340.55.
The benchmark S&P 500 index has risen 0.6 percent over the previous three sessions as investors largely shrugged off mounting tensions in Iraq and focused on a flurry of merger and acquisition activity and better-than-anticipated manufacturing data.
Among the biggest gainers was FedEx Corp, which rose 5.5 percent to $148 after hitting an all-time intraday high of $148.15 after the world's No. 2 package delivery reported a better-than-expected rise in quarterly revenue. The gains helped push the Dow Jones Transportation average up 1.1 percent.
Amazon.com Inc shares jumped 2.5 percent to $333.80 after its Chief Executive Officer Jeff Bezos unveiled a "Fire" smartphone with free, unlimited photo storage, jumping into a crowded field dominated by Apple Inc and Samsung Electronics.
Adobe Systems shares shot up 7.6 percent to $72.67. The stock was the S&P 500's best performer a day after the maker of Photoshop and Acrobat software reported better-than-expected quarterly profit and revenue.
But the stock of ConAgra Foods slid 7.5 percent to $30.39 after the maker of Hunt's tomato ketchup and Slim Jim beef jerky said its adjusted fourth-quarter profit would be lower than expected.
On the political front, U.S. Senate Majority Leader Harry Reid said he does not support sending any U.S. troops into the conflict in Iraq. He described the fighting in Iraq as a "civil war" on Wednesday ahead of a meeting with President Barack Obama about the escalating crisis.
(Reporting by Angela Moon; Additional reporting by Jennifer Ablan; Editing by Jan Paschal)