NEW YORK (AP) — The stock market had a swift and clear reaction to the Federal Reserve’s decision to trim its stimulus efforts: This wasn’t so bad after all.
Stocks surged Wednesday, lifting the Dow Jones industrial average nearly 300 points, after the Fed decided it was time to start modestly scaling back its program to boost America’s growth and stock market. The central bank cited a stronger jobs market and improving economy.
The Dow jumped 292 points, or nearly 2 percent, to 16,167.97 — another all-time high for the blue-chip index. Shortly before the Fed announcement at 2 p.m., the Dow was up just 47 points.
The broader Standard & Poor’s 500 index rose 29 points, also 2 percent, to 1,810.65 and the Nasdaq composite rose 46 points, or 1 percent, to 4,070.06.
The Fed also said Wednesday it is likely to keep cutting its bond purchases.
Fed Chairman Ben Bernanke, who is nearing the end of his tenure, said the bank will likely vote for “measured reductions” in upcoming meetings, as long as the economy show improvement.
Bernanke also said Janet Yellen, who becomes Fed chairwoman once she is confirmed by the Senate, “fully supports” the bank’s decision to start reducing stimulus.
Wednesday’s pullback was a surprise to the market, as most strategists and economists expected the Fed to wait until March before pulling back. But investors say it is a welcome surprise.
“We finally have something in motion,” said Frank Davis, director of trading at LEK Securities “and we have details on how it’s going to work, so it’s something the market can embrace.”