Stocks Rally as Fed Extends Low-Rate Pledge
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The markets shed early losses and jumped into positive territory after the Federal Reserve said it would hold interest rates at exceptionally low levels until 2014.
The Dow Jones Industrial Average rose 83.1 points, or 0.66%, to 12759, the S&P 500 gained 11.4 points, or 0.87%, to 1326 and the Nasdaq Composite rose 31.7 points, or 1.1%, to 2818.
The Federal Reserve said on Wednesday it plans on holding interest rates at exceptionally low levels until late 2014 to support a stronger economic recovery. The central bank also said it expects employment to improve only gradually.
The economic community had differing view points on what exactly this moves indicates.
"This could be an indication that the [FOMC] isn’t ready to pull the trigger on another round of large-scale assets purchases," Paul Edelstein, director of financial economics at IHS Global Insight wrote in a research note following the release. Indeed, many economists have predicted the Fed will kick off a round of quantitative easing to further boost the economy, and help the still embattled housing market.
Tom Porcelli, an economist at RBC Capital Markets, took Wednesday's move to show the Fed is still "scared" about the sluggish level of economic growth and labor-market improvement.
The central bank also revealed a long-run inflation target of 2%. The Fed, under the guidance of Chairman Ben Bernanke, has been working to make itself a more transparent institution. On top of being perhaps more explicit than it ever has regarding inflation, it revealed interest rate and economic growth forecasts from the members of the Federal Open Market Committee.
The tech-heavy Nasdaq got a boost from shares of Apple (NASDAQ:AAPL) that soared more than 6% a day after the iPad-maker posted record quarterly results that shattered expectations on the top and bottom lines. The company briefly topped ExxonMobil (NYSE:XOM) as most valuable company in the U.S. by market capitalization before Exxon shed losses following the Fed statement.
Also on the earnings front, Boeing (NYSE:BA) posted fourth-quarter results that jetted past analysts' expectations. However, the aerospace giant's full-year 2012 outlook fell well short of estimates.
United Technologies (NYSE:UTX), another blue chip, posted mixed results, beating Wall Street's view on the bottom line, but missing on the top line.
Market participants had a slew of other developments to consider as well. Great Britain's economy contracted by 0.2% in the final quarter of 2012, a slightly bigger fall than the 0.1% economists forecast. On a more upbeat note, however, business confidence in Germany, Europe's biggest economy, rose for the third-straight month, accelerating at a quicker pace than economists' expected.
Negotiations between Greece and its private creditors, meanwhile, remained deadlocked on Wednesday. The country has a debt payment to make in late March, and if the embattled country is unable to conclude talks and receive its much-needed rescue funds from the European Union and International Monetary Fund, it risks a messy default.
Commodities markets were mixed. The benchmark crude oil contract traded in New York fell 45 cents, or 0.44%, to $98.50 a barrel. Wholesale RBOB gasoline rose 0.58% to $2.821 a gallon.
In metals, gold fell $5.40, or 0.31%, to $1,659.
European blue chips slid 0.45%, the English FTSE 100 fell 0.5% to 5,723 and the German DAX edged higher by 0.04% to 6,422.
In Asia, the Japanese Nikkei 225 rallied 1.1%.