Dow, S&P 500 surge to new records on Fed decision

Traders work the floor of the New York Stock Exchange after the Dow Jones Industrial Average closed up 293 points on Dec 18, 2013 in New York City. US stocks on Wednesday surged to new records after the US Federal Reserve modestly scaled back its bon
Traders work the floor of the New York Stock Exchange after the Dow Jones Industrial Average closed up 293 points on Dec 18, 2013 in New York City. US stocks on Wednesday surged to new records after the US Federal Reserve modestly scaled back its bond-buying program in a much-anticipated decision. -- PHOTO: REUTERS

NEW YORK, United States (AFP) - US stocks on Wednesday surged to new records after the US Federal Reserve modestly scaled back its bond-buying program in a much-anticipated decision.

The Dow Jones Industrial Average soared 292.71 (1.84 per cent) to 16,167.97, while the broad-based S&P 500 jumped 29.65 (1.66 per cent) to 1,810.65. Both were records.

The tech-rich Nasdaq Composite index rose 46.38 (1.15 per cent) to 4,070.06.

The Fed said it would scale back its bond-buying program from US$85 billion (S$107 billion) to US$75 billion starting in January due to conditions "consistent with growing underlying strength in the broader economy," according to a statement by the Federal Open Market Committee.

But the move to scale back the purchases was accompanied by a decision to extend the period of very-low interest rates.

The move means the current near-zero rate will be in place "well past the time" that the unemployment rate declines below 6.5 per cent," said the FOMC communique.

The overall thrust of the statement was "a bit dovish," said Mr Dan Greenhaus, chief global strategist at BTIG. The move to extend the period of low interest rates "compensated" for the taper decision, he said.

"The market is taking the statement as somewhat dovish, somewhat supportive of growth and the economy, and, by extension, somewhat supportive of asset prices."