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Wall Street hits new highs as Fed keeps stimulus intact

Dow Jones, Nasdaq gain nearly 1%, S&P 500 hits intra-day high

Reuters New York
Last Updated : Sep 19 2013 | 12:48 AM IST
US stocks rallied to a record high on Wednesday after the Federal Reserve surprised investors by saying it would not begin to cut its bond-buying programme that has been a driving force behind Wall Street's climb of more than 20% this year.

After a mostly quiet session leading up the announcement, the S&P 500 showed a gain of nearly 1% after the central bank would continue buying bonds at an $85 billion monthly pace for now.

The Dow Jones industrial average rose 109.28 points or 0.7%, to 15,639.01, the S&P 500 gained 15.54 points or 0.91%, to 1,720.3 and the Nasdaq Composite added 26.887 points or 0.72%, to 3,772.586.

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Market participants had largely been expecting the central bank to begin a withdrawal of the bond-buying program by about $10 billion a month.

"No taper, the market loves it, we will see if that lasts but boy, we are off to the races," said Brad McMillan, Chief Investment Officer for Commonwealth Financial in Waltham, Massachusetts.

"From a short term stock market perspective it can be seen as a good thing because the market likes to see continued Fed stimulus. From a real economy standpoint, what it says is the Fed is actually more nervous about the economy than is generally perceived."

The Fed now sees growth in a 2% to 2.3% range this year, down from 2.3% to 2.6% in its June estimates. The downgrade for next year was even sharper: 2.9 to 3.1%, from 3.0 to 3.5%.

A White House official said Federal Reserve Vice Chair Janet Yellen is the front runner to take over the top job at the US central bank when Ben Bernanke steps down, the strongest indication yet of her likely nomination.

Materials stocks rallied as the dollar fell to a seven-month low versus the euro and gold rallied after the announcement. Newmont Mining Corp jumped 5% to $29.95 and the S&P materials index gained 1.9%.

Looking beyond the Fed, market participants had an eye on the looming budget and debt limit debate in Washington. The White House said Wednesday the latest Republican proposal moves away from compromise.

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First Published: Sep 19 2013 | 12:45 AM IST

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