“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.”
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