Stocks rise as Federal Reserve stands by stimulus
Fear of a revived debt crisis in Europe faded from the stock market Wednesday, freeing the Dow Jones industrial average to touch an all-time high.
After dipping Monday on concerns Cyprus would become the latest European nation to stir fiscal chaos, the Dow posted its second straight day of gains.
Stocks traded steadily higher for most of the day and spiked after the Federal Reserve said it will continue with aggressive measures to boost the economy. Fed Chairman Ben Bernanke said the Cyprus crisis posed no major risk to the U.S. economy.
The Dow was up 44 points shortly before the Fed announcement. It rose as much as 91 points shortly after the Fed released its policy statement at 2 p.m., touching an all-time high of 14,546 at 2:25 p.m.
The Fed said the U.S. economy has strengthened after pausing late last year, but still needs support from the central bank. The Fed plans to continue buying $85 billion in bonds per month indefinitely to keep long-term borrowing costs down and spur investment. It also said it would keep short-term interest rates at record lows, at least until unemployment falls to 6.5 percent.
Unemployment fell last month to 7.7 percent, the lowest in four years. The Fed doesn’t expect the rate to reach its target until 2015.
The Dow closed up 55.91 points Wednesday, or 0.4 percent, to 14,511.73.
Stock markets were little changed Tuesday despite rising uncertainty in Cyprus. Anyone watching “would conclude that the market decided Cyprus is overblown as an issue,” said Brian Gendreau, a strategist at Cetera Financial Group.
Gendreau said traders had been concerned about what precedent might be set by Cyprus’ efforts to avoid a crisis. A plan to seize money from bank savings accounts was met with outrage and was rejected Tuesday by the island nation’s parliament.
The nation’s unusual status as an international financial haven makes it an unlikely roadmap for future rescue efforts.
“I think the market’s going to start looking at other things,” he said.
In other trading, the Standard & Poor’s 500 index rose 10.37 points, or 0.7 percent, to 1,558.71. The Nasdaq composite index rose 25.09, or 0.8 percent, to 3,254.19.