Stocks climbed to record highs Wednesday after the Federal Reserve unexpectedly refrained from reducing bond buying, emboldening bulls who have enjoyed a 154% rally since stimulus began five years ago.
The Dow Jones industrial average closed up 147.21, or 0.95%, at 15,676.94, and the S&P 500 rose 20.76, or 1.22%, closing at 1,725.52; both were records. The Nasdaq composite was up 37.94, or 1.01%, to close at 3,783.64.
Meanwhile, 10-year Treasury yields sank 5%, or 14.5 basis points, to 2.708%. All numbers are preliminary.
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. EDT, 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 policymaking 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 Mr. Bernanke first outlined a possible timetable for a reduction in the asset purchases.
The Federal Open Market Committee has been debating how to scale back its $85 billion in monthly purchases of Treasury and mortgage debt aimed at stoking economic growth and reducing unemployment that was 7.3% in August. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record $3.66 trillion through three rounds of bond buying.
Among 64 economists surveyed by Bloomberg News, 33 predicted the Fed would reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.
