Stocks Move Sharply Higher In Reaction To Fed Announcement - U.S. Commentary

(RTTNews) - With traders reacting positively to the Federal Reserve's monetary policy announcement, stocks have moved sharply higher in mid-afternoon trading on Wednesday. The major averages have shown strong upward moves, with the Dow and the S&P 500 reaching new record highs.

The major averages have seen some further upside in recent trading, reaching new highs for the session. The Dow is up 148.63 points or 1 percent at 15,678.36, the Nasdaq is up 35.09 points or 0.9 percent at 3,780.79 and the S&P 500 is up 20.50 points or 1.2 percent at 1,725.26.

The rally on Wall Street comes on the heels of news that the Fed surprised most economists by refraining from scaling back its asset purchase program.

The Fed said it would continue to purchase bonds at a pace of $85 billion per month, noting that it decided to wait for more evidence that economic progress will be sustained before adjusting the pace of its purchases.

Looking ahead, the central said future decisions about when to moderate the pace of asset purchases will be based on whether incoming information continues to support the expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective.

The Fed noted that the asset purchases are not on a preset course and their pace will remain contingent on the economic outlook and the assessment of the likely efficacy and costs of such purchases.

"Nothing changed at the Fed. No rate hike. No tapering. Forecasts are just somewhat different from the previous release (slightly less growth)," said Alexandra Estiot, Senior Economist at BNP Paribas. "The Fed is worried by the lack of progress on the labor market and the tightening of financial conditions."

She added, "On the other hand, the risks on QE3 are no more balanced: if a slowdown in purchases is discussed at length, the possibility of an acceleration disappeared from the statement."

Gold stocks have shown a substantial upward move on the heels of the Fed announcement, driving the NYSE Arca Gold Bugs Index up by 8.4 percent. The strength in the sector comes as the price of gold has spiked higher in electronic trading.

Significant strength has also emerged among housing stocks, as reflected by the 4 percent gain being posted by the Philadelphia Housing Sector Index. The gain has lifted the index to a two-month high.

Commercial real estate, utilities, and steel stocks have also moved notably higher, moving to the upside along with most of the major sectors.

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan's Nikkei 225 Index surged up by 1.4 percent, while Hong Kong's Hang Seng Index ended the day down by 0.3 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the German DAX Index and the French CAC 40 Index rose by 0.5 percent and 0.6 percent, respectively.

In the bond market, treasuries have shown a strong move to the upside on the heels of the Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.8 basis points at 2.765 percent.