S&P 500 climbs to record as Fed refrains from reducing stimulus
BEN S. BERNANKE, chairman of the U.S. Federal Reserve, speaks during a news conference following the Federal Open Market Committee meeting in Washington, D.C., on Wednesday. The Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs to see more signs of lasting improvement in the economy.
NEW YORK - The Standard & Poor’s 500 Index climbed to a record high after the Federal Reserve unexpectedly refrained from reducing bond buying, emboldening bulls who have enjoyed a 154 percent rally since stimulus began five years ago.
Utilities, commodity shares and financial companies rallied the most out of 10 groups in the S&P 500, rising more than 1.5 percent. Bank of America Corp. and General Electric Co. jumped more than 1.8 percent. Adobe Systems Inc. surged 9.3 percent as the largest maker of graphic-design tools said it amassed more than 1 million customers for its online services. FedEx Corp. rose 5.3 percent after earnings topped estimates.
The S&P 500 jumped 1.4 percent to 1,729.22 at 3:04 p.m. in New York, erasing an earlier decline of as much as 0.3 percent. The benchmark index climbed above its all-time high of 1,709.67 reached on Aug. 2. The Dow Jones Industrial Average rose 176.39 points, or 1.1 percent, to 15,706.12, also a record. Treasuries and gold rallied while the dollar slid.
U.S. stocks volume surged after the Fed’s announcement. About 552 million shares traded on all exchanges in the 10 minutes after 2 p.m., compared with 113 million in the preceding 10 minutes, according to data compiled by Bloomberg.
“Fed driven liquidity will continue for at least another month or two,” Terry Sandven, chief investment strategist at U.S. Bank Wealth Management, said in a phone interview. His firm manages $112 billion. “On the other side of that equation, it sends the signal that the Fed is not yet confident that economic conditions are improving at a sustainable rate.”
Chairman Ben S. Bernanke and his policy-making colleagues refrained from paring record accommodation as rising borrowing costs show signs of slowing the four-year expansion. Treasury yields have jumped since May, when Bernanke first outlined a possible timetable for a reduction in the asset purchases that have swelled the Fed’s balance sheet to $3.66 trillion.
“The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Federal Open Market Committee said Wednesday at the conclusion of its two-day meeting in Washington, D.C. While “downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”