By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks rallied Wednesday after
the Federal Reserve announced that it would begin slowing down the
pace of bond purchases, known as quantitative easing. The Fed
policymakers voted to cut $10 billion a month from its $85 billion
bond-buying program, starting in January.
Dow Jones Industrial Average (DJI) jumped 182 points, or 1%, to
16,055.01. The S&P 500 index (SPX) reversed earlier losses and
rose 18 points, or 1% to 1,798.48. Nasdaq Composite (RIXF) was up
17.70 points to 4,041.13.
The Federal Open Market Committee in a statement on its policy
decision, said "In light of the cumulative progress toward maximum
employment and the improvement in the outlook for labor market
conditions, the Committee decided to modestly reduce the pace of
its asset purchases."
Earlier, housing starts data showed that Americans built more
new homes than expected in November, shrugging off rising mortgage
rates. The pace at which new homes were built soared to a
seasonally adjusted annual rate of 1.09 million, the highest rate
since February 2008, with surges for single-family homes and
apartments, the government reported Wednesday.
Better-than-expected housing data sent the S&P 500
home-builders index up 4.6%, as Lennar Corp. (LEN), D.R. Horton,
Inc (DHI) and PulteGroup, Inc (PHM) are among the best-performing
stocks on Wednesday.
"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.
"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.
* Comment: Joe Bell, senior equity analyst with Schaeffer's
Investment Research thinks markets are rewarding the clarity: "It
is a good sign that markets are reacting positively to news that
the economy is in a good shape and improving. The Fed's decision is
data driven, so if it decided to taper it is because it is
confident about the recovery in the economy."
* Today's movers & shakers: Lennar Corp. shares rose 3%
after fiscal fourth-quarter profits and revenues beat estimates.
Shares of Jabil Circuit, Inc fell 20% after earnings and outlook
fell short of Wall Street's expectations. Ford Motor Co shares slid
5% as the car maker lowered its 2014 outlook. Target Corp. shares
rose 2.4% after the retailer's chief executive, Gregg Steinhafel,
said he was pleased with Target's holiday performance and
introduced a round of "last minute" sales. FedEx Corp shares fell
0.8% after earnings missed expectations. General Mills, Inc dropped
2.3% as second-quarter earnings disappointed. AMC gained 9.2% on
the day after debuting on the New York Stock Exchange Wednesday
morning. The initial public offering priced shares of the movie
theater company at $18 a piece. Read more in the Movers &
Shakers column.
* Other markets: Gold records modest gains ahead of the Fed
announcement and crude oil futures moved higher after a drop in
crude U.S. inventories. Stocks in Asia were mostly up led by gains
in Japan and the European stocks are broadly higher.
More stories on MarketWatch:
Live blog: Fed decision and Bernanke press conference
Poll: When do you expect the Fed to taper its bond-buying
program
Even Wall Street's bears see stock rally next year
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