Closing Bell: Markets Hit Record Highs After Fed Stands Pat on Stimulus

Wall Street
Richard Drew/AP

Stocks soared Wednesday after the Federal Reserve said it was sticking by its $85 billion in monthly bond purchases, surprising investors who were braced for a reduction in the stimulus program.

The Dow Jones industrial average (^DJI) jumped 147 points, or 1 percent, to 15,676, the Standard & Poor's 500 index (^GPSC) advanced 20 points, or 1.2 percent, to 1,725 -- both of which were record highs -- and the Nasdaq composite index (^IXIC) gained 38 points, or 1.2 percent, to 3,783.

In a statement, Fed policymakers voted to maintain the central bank's $85 billion-a-month bond-buying program, which has been in place in one form or another since late 2008. The bank said that while the U.S. economy was improving, policymakers "decided to await more evidence that progress will be sustained" before deciding to cut back.

Bond yields plunged on the news: The yield on the 10-year Treasury note fell from 2.85 percent to 2.71 percent, its biggest single-day drop in almost two years.

The market had been in a holding pattern before the Fed released its policy statement at 2 p.m. Eastern time. Moments before the decision was announced, the Standard & Poor's 500 was little changed from its close the day before.

The fate of the Fed's economic stimulus program has been the biggest question on Wall Street for months. It was widely expected that the Fed would cut back on its bond buying at its September meeting.

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In regulatory news, the Securities and Exchange Commission voted 3-2 to propose a rule that would compel companies to report the difference in pay between their CEOs and ordinary employees. Employers would have to report the ratio between their chief executive's annual compensation and the median, or midpoint, pay of employees. Business groups oppose the idea, saying it would add to costs. The SEC opened the proposal to public comment for 60 days; it could be formally adopted sometime after that.

In commodities news, the price of gold jumped 4 percent to $1,361,80 an ounce on inflation fears, while benchmark U.S. crude oil rose 2.5 percent to $108.07 a barrel, it's largest price jump in three weeks.

In corporate news, shares of General Mills (GIS) moved lower most of the day, after the maker of Cheerios and Yoplait yogurt reported its earnings fell in its fiscal first quarter compared to the same period a year ago. For the three months ended Aug. 5, the company said it earned $459.3 million, or 70 cents a share, which was in line with analyst expectations. Last year, the company earned $548.9 million, or 82 cents a share. In its overall U.S. retail business, General Mills said sales rose 4 percent to $2.58 billion, as the company scrambled to catch up with the booming popularity of Greek yogurt by rolling out Greek versions of its Yoplait yogurt. However, buoyed by the Fed report, the stock recovered sharply to end the day up 0.8 percent to $50.16

More Stocks in the News:

  • Struggling smartphone maker BlackBerry (BBRY) could cut its workforce by up to 40 percent by the end of the year, according to The Wall Street Journal. The newspaper said that the Canadian company plans to make the cuts through layoffs that will occur in all of its departments, potentially affecting several thousand people.

  • Newmont Mining (NEM) jumped 8.2 percent to $30.87, as materials stocks rallied after the dollar fell to a seven-month low versus the euro after the Fed announcement.

  • Adobe Systems (ADBE) climbed 9.2 percent to $52.58 after the company said it added more subscribers to its "Creative Cloud" software service than previously anticipated.

  • FedEx (FDX) rose 5 percent to $116.24 after the company reported a 7 percent increase in quarterly profit, helped by strong earnings in its ground-shipping business.

  • Shares of BioMarin Pharmaceutical (BMRN) rose 2 percent to $77.50 after analysts praised the company's drug pipeline. Shares touched a new high of $77.78 as stocks rallied following the Fed's announcement.

What to Watch Thursday:

  • At 8:30 a.m. Eastern time, the Labor Department releases weekly jobless claims and the Commerce Department releases current account trade deficit for the second quarter.

  • At 10 a.m., Freddie Mac releases weekly mortgage rates; the Conference Board releases leading indicators for August; and the National Association of Realtors releases existing home sales for August.

These major companies are scheduled to report quarterly corporate earnings:

  • ConAgra Foods (CAG)

  • Pier 1 Imports (PIR)

  • Rite Aid (RAD)

-Compiled from staff and wire reports.