Stocks surge as Fed green lights taper; record closes for Dow, S&P 500
By: Kate Gibson | Markets Writer
U.S. stocks surged on Wednesday, with the
S&P 500 and Dow industrials closing at records, after the Federal
Reserve moved to cut stimulus, saying it expects the labor market will
continue to improve and vowing to keep interest rates low.
"Investors are looking past the taper and looking at the strength of the economy that is perceived with this news," said Chris Gaffney, senior market strategist at EverBank. Read: Fed taper seen as good sign for the economy, bad omen for bonds.
"The Fed did a great job telegraphing it to the markets, as stocks are moving in the opposite direction than you'd think," he added of equities rallying on the news.
The Fed said it would start to taper its bond-buying program to $75 billion a month from $85 billion, an initial move to unwinding the stimulus that the central bank began to help the economy heal from the recession that came after the near meltdown of the country's financial system.
At a news conference, Fed Chairman Ben Bernanke said the central bank would likely make similar moderate steps at future meetings so long as the data support such moves.
Shares of Ford Motor fell sharply after the automotive company projected lower pretax profit in 2014. Lennar reported a 13 percent increase in quarterly orders, with its shares rallying along with those of other homebuilders. Shares of FexEx slid after the global shipper posted quarterly results that missed Wall Street estimates. AMC Entertainment rallied in the movie-theater operator's first day as a public company.
"Investors are looking past the taper and looking at the strength of the economy that is perceived with this news," said Chris Gaffney, senior market strategist at EverBank. Read: Fed taper seen as good sign for the economy, bad omen for bonds.
"The Fed did a great job telegraphing it to the markets, as stocks are moving in the opposite direction than you'd think," he added of equities rallying on the news.
The Fed said it would start to taper its bond-buying program to $75 billion a month from $85 billion, an initial move to unwinding the stimulus that the central bank began to help the economy heal from the recession that came after the near meltdown of the country's financial system.
At a news conference, Fed Chairman Ben Bernanke said the central bank would likely make similar moderate steps at future meetings so long as the data support such moves.
Shares of Ford Motor fell sharply after the automotive company projected lower pretax profit in 2014. Lennar reported a 13 percent increase in quarterly orders, with its shares rallying along with those of other homebuilders. Shares of FexEx slid after the global shipper posted quarterly results that missed Wall Street estimates. AMC Entertainment rallied in the movie-theater operator's first day as a public company.
| Name | Price | Change | %Change | ||
|---|---|---|---|---|---|
| DJIA | Dow Jones Industrial Average | 16167.97 | 292.71 | 1.84% | |
| S&P 500 | S&P 500 Index | 1810.65 | 29.65 | 1.66% | |
| NASDAQ | Nasdaq Composite Index | 4070.06 | 46.38 | 1.15% |
The Dow Jones Industrial Average closed at a record, as did the S&P 500. Health care led gains that included all 10 of the S&P 500's major sectors.
The Nasdaq also rose, finishing at a 13-year high.
The Chicago Board Options Exchange Volatility Index fell, halting a six-day rise.
The dollar declined slightly against the currencies of major U.S. trading partners, with the yield on the 10-year Treasury note used in figuring mortgage rates and other consumer loans rose 3 basis points to 2.87.
Gold futures for February delivery settled at $1,235 an ounce, up $4.90, or 0.4 percent, during the regular trading session, and were volatile in electronic trading after the Fed decision. January crude added 58 cents, or 0.6 percent, to end at $97.80 a barrel.
The Nasdaq also rose, finishing at a 13-year high.
The Chicago Board Options Exchange Volatility Index fell, halting a six-day rise.
The dollar declined slightly against the currencies of major U.S. trading partners, with the yield on the 10-year Treasury note used in figuring mortgage rates and other consumer loans rose 3 basis points to 2.87.
Gold futures for February delivery settled at $1,235 an ounce, up $4.90, or 0.4 percent, during the regular trading session, and were volatile in electronic trading after the Fed decision. January crude added 58 cents, or 0.6 percent, to end at $97.80 a barrel.
Futures Now: Anxiety rises in bond market
The Futures Now team discusses whether the bond market is getting anxious ahead of potential taper news.
Regardless of the Fed's decision, "the
overriding theme is that rates are going to stay low for several more
years," said BTIG's Greenhaus.
"The housing numbers this morning are part of a larger series of data points showing the economy picking up steam heading into the new year," said Dan Greenhaus, chief global strategist at BTIG LLC, of the report that had housing starts jumping to a near six-year high in November in the latest show of strength in the housing market.
Another strategist agreed the data supports the view of an economy poised to strengthen in 2014.
The "continued buoyancy as the housing market builds momentum vindicates our stance and the latest blockbuster report did not disappoint," emailed Andrew Wilkinson, chief economic strategist at Miller Tabak.
On Tuesday, stocks closed slightly lower as Wall Street adopted a cautious tone the day before the Fed decision.
"The housing numbers this morning are part of a larger series of data points showing the economy picking up steam heading into the new year," said Dan Greenhaus, chief global strategist at BTIG LLC, of the report that had housing starts jumping to a near six-year high in November in the latest show of strength in the housing market.
Another strategist agreed the data supports the view of an economy poised to strengthen in 2014.
The "continued buoyancy as the housing market builds momentum vindicates our stance and the latest blockbuster report did not disappoint," emailed Andrew Wilkinson, chief economic strategist at Miller Tabak.
On Tuesday, stocks closed slightly lower as Wall Street adopted a cautious tone the day before the Fed decision.
—By CNBC's Kate Gibson
Coming Up This Week:
Wednesday: Earnings from Oracle, Paychex, Herman Miller and Steelcase.
Thursday: Initial jobless claims; existing home sales for November; Philadelphia Fed Survey; Leading indicators for November. Earnings from Nike, Red Hat, Darden, Accenture, Rite-Aid, Worthington Industries and Tibco Software.
Friday: Third-quarter GDP. Earnings from Blackberry, Carmax and Walgreen.
Coming Up This Week:
Wednesday: Earnings from Oracle, Paychex, Herman Miller and Steelcase.
Thursday: Initial jobless claims; existing home sales for November; Philadelphia Fed Survey; Leading indicators for November. Earnings from Nike, Red Hat, Darden, Accenture, Rite-Aid, Worthington Industries and Tibco Software.
Friday: Third-quarter GDP. Earnings from Blackberry, Carmax and Walgreen.
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