The Standard & Poor’s 500 index rose 11.41 points, or 0.9 percent, to 1,326.06. The S&P is up 5.4 percent for the year and more than 14 percent from its Nov. 25 low.
BY DANIEL WAGNER | THE ASSOCIATED PRESS
The stock market bounced to its highest close since last spring Wednesday after the Federal Reserve pledged to keep interest rates near zero for almost three more years.
Bond yields dropped sharply, then bounced back later in the day when investors began looking more closely into the Fed’s deliberations. The yield on the five-year Treasury note touched an all-time low.
The big moves in both markets came at 12:30 p.m. EST, when the Fed’s monetary policy committee said it was unlikely to raise interest rates before late 2014. It had previously promised to keep rates low into the middle of 2013.
The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there since. The announcement was a sign the Fed expects the economy, which is improving, to need significant help for three more years.
The Dow closed up 83.10 points, or 0.7 percent, at 12,758.85. That’s the highest close since May. The Dow peaked for the year in April at 12,810. Before that, it had not been so high since May 2008.
In the bond market, the yield on the 10-year Treasury note was at 2.05 percent an hour before the announcement and quickly fell to 1.92, a significant move. It rose to 1.99 percent two hours later.
The bounce-back happened at about 2 p.m., when the Fed released details of how the committee voted. Six of its 17 members had favored an interest rate increase this year or next — well before late 2014 in either case.
The yield on the five-year Treasury note hit 0.76 percent, an all-time low. Bond yields fall when their prices rise.
The Fed’s extension of low rates also signaled it expects inflation to stay low. Low inflation makes Treasurys more attractive by helping to maintain the value of bond owners’ fixed returns. Rising prices would eat into those returns.
Technology stocks rose all morning, bucking the wider market, after Apple reported its best quarter and blew away analyst estimates because of strong holiday sales of the iPhone and iPad.
Apple stock jumped 6.3 percent, helping lift the Nasdaq composite index by 31.67 points, or 1.1 percent, to close at 2,818.31. The Nasdaq is up 8.2 percent this year, nearly twice the gain for the Dow Jones industrial average.
The Standard & Poor’s 500 index rose 11.41 points, or 0.9 percent, to 1,326.06. The S&P is up 5.4 percent for the year and more than 14 percent from its Nov. 25 low.