U.S. stocks soar as Federal Reserve scales back stimulus

“U.S. stocks rallied Wednesday as markets interpreted the Federal Reserve’s decision to begin the tapering of bond purchases in January as confidence in the underlying strength of the economy,” Anora Mahmudova reports for MarketWatch. “The Fed policymakers voted to reduce monthly asset purchases to $75 billion from $85 billion, citing improvement in the outlook for the economy.”

“Dow Jones Industrial Average jumped 228 points, or 1.5%, to 16,105.40. The S&P 500 index rallied 24 points, or 1.3% to 1,805.84, within a hair’s breadth of its all-time high. Nasdaq Composite was up 32 points or 0.8% to 4,055.70,” Mahmudova reports. “All ten main sectors on the S&P 500 were higher with financials and health care stocks leading the gains. Nasdaq’s rally was somewhat hampered by Apple Inc., [AAPL] which fell 1.1%… The Federal Open Market Committee stressed its commitment to low short-term interest rates and added new language that it plans to maintain the target Fed funds rates ‘well past the time that the unemployment rate declines below 6.5%.'”

“‘Everyone was focusing on the wrong animal, they were betting on whether the Fed is hawkish or dovish, but they missed the fact that the Fed is bullish on the economy,’ said Burt White, chief investment officer at LPL Financial,” Mahmudova reports. “‘Essentially the Fed made a trade: it traded liquidity — or shaving off $10 billion a month — for a boost in confidence. Changing the unemployment expectations to 6.5% it committed to keeping low raters for longer,’ he added.”

Read more in the full article here.

19 Comments

    1. Peter, one day does not a stock’s value make. This time of year, hedge funds and mutual funds are unloading some stocks for tax reasons, performing “window dressing” – the time when the funds buy “hot” stocks so that when the must report their year-end holdings, their portfolios look sexier than they actually were, and the daily ups-and-downs. Add to that they latest installment in the China Mobile soap opera, and that might explain why.

      But if you own a stock of any company, Apple included, don’t obsess about the day-to-day. Look at Apple’s stock chart not just for a quarter or this year, but look at it over 5, 10 or 20 years. I will own my Apple stock for many years going forward, reinvesting my dividends to help it grow more. While 2013 has not been a banner year for a stock that has seen incredible growth in the past 10 years, I suspect it’s merely taking a breather before making another surge.

      Looking back 20 years from now, an investor like me will simply shrug my shoulders and wonder what all the noise and rancor was about. I have a hunch that Apple’s valuation will be significantly higher than it is today. Investors need patience. You can’t urge a tree to grow faster – you have to let it simply grow. One day, the tree is a thin sampling. But before you know it, the tree will have grown strong, wide and tall. As long as Apple remains a well run company with growing earnings and increasing cash flow, the stock’s price will take care of itself.

      So go outside. Enjoy the coming winter and holiday season. Happy holidays.

  1. QE is theft from everyone who holds a US Dollar in their pockets and a gift to the Banksters who robbed the world blind and crashed the economy. It was all done by the Federal Reserve without the consent of any President, Congress or Court.

    The Deficit Hawks have been crying about Federal Spending but strangely quiet about the wholesale conjuring of money out of thin air by the Fed, who has racked up new money to be given to banks through the discount window at essentially no cost at the rate of over $1 Trillion/year. This reduction means they will only be mining our wallet at the rate of $900 Billion/year.

        1. until that one second long tipping point that will occur when we all realize that the “money” is either just paper or these days just literally someone making a computer entry that creates new “money” out of thin air.
          Thus devaluing every “dollar” that previously “exists”
          Oh, it it possible that it can go along a bit longer…….until the exact second that we all collectively lose our nerve. At that point…………..Weimar Republic, look it up, I dont do homework for anyone.

          1. I hold hard currency, but until that day must live in the world where fiat money is how we get paid and pay for things.

            Last time I checked the Apple Store will not sell me a new Mac for gold, silver or platinum. They also will not barter for services. Until then I must use US Dollars and QE is devaluing our currency.

            As to Weimar, I lived in Germany for a number of years and have talked to Germans about that time in the Gasthaus over a beer or two.

      1. Deflation kills people with paper or illiquid assets. Deflation is a buying opportunity for those who have the money to buy.
        Through QE and the bailouts, the Banks were able to hold on to real estate that should have been liquidated through TARP or the open market at a significant discount. I had highly run up Apple stock and was ready to pounce and saw empty properties held off of the market by zombie banks propped up by the Fed’s discount window.

    1. There are no deficit hawks. The last deficit hawk died in the 1950’s.

      Both parties sold out. The only controversy is how governments tend to indebt themselves:
      1) bailing out Wall Street (both parties complicit)
      2) enlarging the military-industrial complex (right wingers)
      3) domestic infrastructure & social services (left wingers)

      Nobody is willing to actually balance the budget. Nobody left with a spine in D.C. — all have sold out to their corporate campaign funders. But then, one also has to blame the American people, who refuse to listen to anyone who proposes that we all work together to solve problems and pay off our accrued debts. Compromise is such a dirty word, you know.

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