Investing.com - U.S. stocks shot up on Wednesday after the Federal Reserve said it was making no changes to its USD85 billion monthly bond-buying program, catching many off guard who were expecting an announcement to trim that figure to a lower level.
Fed asset purchases spur recovery by driving down interest rates, which makes stocks attractive assets, normally at the dollar's expense.
At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.95%, the S&P 500 index rose 1.22%, while the Nasdaq Composite index rose 1.01%.
The Federal Reserve on Wednesday left its key benchmark lending target, the fed funds rate, unchanged at 0.25% and kept its USD85 billion monthly asset-purchasing program in place.
The Fed said the economy was showing signs of improvement though it still faced enough headwinds to prompt monetary authorities to hold off on tapering its asset purchases, which push up stock prices arguably by design.
"The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate," the Fed said in a statement.
"The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."
The Fed pointed out that household spending and business fixed investment have improved, while the housing sector has been strengthening as well.
However, mortgage rates have risen, while U.S. fiscal issues are restraining economic growth.
"Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy," the Fed said.
"However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the Fed said, adding it would continue to buy USD40 billion a month in mortgage-backed securities and USD45 billion in longer-term Treasury securities.
Fed Chairman Ben Bernanke told a press conference afterwards that he felt past and present rounds of asset purchases have been effective, though he added government inability to tackle debt and deficits, including calls in Congress to shut down the government due to fiscal and policy disputes, concerned monetary authorities.
Market participants largely ignored Commerce Department data revealed that U.S. building permits fell by 3.8% to 918,000 units in August from 954,000 in July. Analysts were expecting building permits to fall by 0.4% to 950,000 units last month.
The Commerce Department added that U.S. housing starts rose 0.9% to 891,000 units last month from a downwardly revised 883,000 units in July, missing expectations for a 3% increase to 917,000 units.
Leading Dow Jones Industrial Average performers included Alcoa, up 3.63%, Home Depot, up 2.07%, and Coca-Cola, up 2.06%.
The Dow Jones Industrial Average's worst performers included UnitedHealth Group, down 1.78%, Walt Disney, which was up 0.12%, and Verizon, up 0.27%.
European indices, meanwhile, finished largely higher.
After the close of European trade, the EURO STOXX 50 rose 0.48%, France's CAC 40 rose 0.60%, while Germany's DAX 30 finished rose 0.45%. Meanwhile, in the U.K. the FTSE 100 finished down 0.17%.
On Thursday, the U.S. is to release the weekly report on initial jobless claims, as well as the Philly Fed manufacturing index and data on existing home sales.
Fed asset purchases spur recovery by driving down interest rates, which makes stocks attractive assets, normally at the dollar's expense.
At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.95%, the S&P 500 index rose 1.22%, while the Nasdaq Composite index rose 1.01%.
The Federal Reserve on Wednesday left its key benchmark lending target, the fed funds rate, unchanged at 0.25% and kept its USD85 billion monthly asset-purchasing program in place.
The Fed said the economy was showing signs of improvement though it still faced enough headwinds to prompt monetary authorities to hold off on tapering its asset purchases, which push up stock prices arguably by design.
"The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate," the Fed said in a statement.
"The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."
The Fed pointed out that household spending and business fixed investment have improved, while the housing sector has been strengthening as well.
However, mortgage rates have risen, while U.S. fiscal issues are restraining economic growth.
"Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy," the Fed said.
"However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the Fed said, adding it would continue to buy USD40 billion a month in mortgage-backed securities and USD45 billion in longer-term Treasury securities.
Fed Chairman Ben Bernanke told a press conference afterwards that he felt past and present rounds of asset purchases have been effective, though he added government inability to tackle debt and deficits, including calls in Congress to shut down the government due to fiscal and policy disputes, concerned monetary authorities.
Market participants largely ignored Commerce Department data revealed that U.S. building permits fell by 3.8% to 918,000 units in August from 954,000 in July. Analysts were expecting building permits to fall by 0.4% to 950,000 units last month.
The Commerce Department added that U.S. housing starts rose 0.9% to 891,000 units last month from a downwardly revised 883,000 units in July, missing expectations for a 3% increase to 917,000 units.
Leading Dow Jones Industrial Average performers included Alcoa, up 3.63%, Home Depot, up 2.07%, and Coca-Cola, up 2.06%.
The Dow Jones Industrial Average's worst performers included UnitedHealth Group, down 1.78%, Walt Disney, which was up 0.12%, and Verizon, up 0.27%.
European indices, meanwhile, finished largely higher.
After the close of European trade, the EURO STOXX 50 rose 0.48%, France's CAC 40 rose 0.60%, while Germany's DAX 30 finished rose 0.45%. Meanwhile, in the U.K. the FTSE 100 finished down 0.17%.
On Thursday, the U.S. is to release the weekly report on initial jobless claims, as well as the Philly Fed manufacturing index and data on existing home sales.