By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks closed near record levels
on 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 and welcomed its commitment
to low rates for a considerable time.
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 (DJI) soared to close near its
all-time high with the best point gain since October 10. Dow added
293 points, or 1.8%, to 16,167.97. The S&P 500 index (SPX) rose
30 points, or 1.7% to 1,810.65, within a hair's breadth of its
all-time high. Nasdaq Composite (RIXF) was up 16 points or 1.1% to
4,070.66.
Financials and health care sectors led the gains on the S&P
500 Nasdaq's rally was somewhat hampered by Apple Inc., (AAPL)
which fell 0.8%.
The Federal Open Market Committee stressed its commitment to low
short-term interest rates well after bond purchases end altogether
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%."
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 4.8%, as Lennar Corp. (LEN), D.R. Horton,
Inc (DHI) and PulteGroup, Inc (PHM) are among the best-performing
stocks on Wednesday.
In other markets:
* 10-year Treasury yields rose modestly, up 4 basis points to
2.89%
* Gold futures were volatile and settled $1,235 an ounce
* Crude oil futures rose to highest in more than a week.
* Stocks in Asia rose and the European stocks rebounded
"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 6.3%
after fiscal fourth-quarter profits and revenues beat estimates.
Shares of Jabil Circuit, Inc fell 20.5% after earnings and outlook
fell short of Wall Street's expectations. Ford Motor Co shares slid
6.3% as the car maker lowered its 2014 outlook. Target Corp. shares
rose 3.1% 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. Shares in Apple Inc
dropped 0.8% hampering gains on the Nasdaq Composite. General
Mills, Inc recovered after dropping more than 2% 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.
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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