Stocks Rise to Record High as Fed Maintains Stimulus
NEW YORK ( TheStreet) -- Major U.S. stock markets posted sharp gains Wednesday rallying on the Federal Reserve's statement that the U.S. economy wasn't ready for a tapering of the central bank's unprecedented efforts at maintaining lenient monetary policies. The Fed said that it will continue to buy $85 billion in bonds per month until there's stronger evidence of economic improvement.
The central bank said in its policy-making statement Wednesday that it will maintain its current level of asset purchases given that the unemployment rate remains "elevated," mortgage rates have risen further, and fiscal policy has been restraining economic growth. It was widely assumed that the central bank would reduce the pace of its monthly bond purchases by $10 billion.
"The tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market," the statement said.
The S&P 500 gained 1.22% to reach a new all-time high of 1,725.52 and booked a fourth straight day of gains. The Dow Jones Industrial Average added on 0.95% to 15,676.94. The Nasdaq traded ahead by 1.01% to 3,783.64.
"This FOMC edition feels less dovish than it does outright scared," Eric Green, the global head of rates and commodity research at TD Securities in New York commented in a client note. "The market now has to adjust to a new probability, that tapering is delayed into the new year."
But the Fed's decision not to curb its bond-buying may also reflect the view that the U.S. economic recovery is slowing or worse could stumble, said Marc Doss, regional chief investment officer at Wells Fargo Private Bank.
"I think the Fed lost their courage today," Doss said in a phone interview from San Diego. "We're not buying into this rally, ... we would probably take some profits into this rally because it does create some longer-term questions about the Fed's view of the sustainability of this recovery."