The Federal Reserve is keeping Wall Street’s big rally alive — and giving the Treasury market a boost as well.
NEW YORK (AP) — The Federal Reserve is keeping Wall Street’s big rally alive — and giving the Treasury market a boost as well.
The Fed said Wednesday it will start buying Treasurys to help open up tight credit markets and help the economy start growing again. The central bank will purchase up to $300 billion of longer-term Treasury securities over the next six months. The decision sent both government bonds and stocks soaring as investors expected the move to drive down borrowing costs for everything from mortgages to credit cards.
The Fed’s announcement accompanied its decision to keep interest rates at historically low levels. It also reiterated Chairman Ben Bernanke’s prediction made Sunday night on the CBS program “60 Minutes” that government steps should return the economy to sustainable growth.
“They are certainly, assertively doing everything they can to intervene,” said David Darst, chief investment strategist of Morgan Stanley’s Global Wealth Management Group.
For both the stock and bond markets, the Fed’s announcement was a welcome surprise. After the last Fed meeting in January, policy makers said they were considering buying government debt. But investors were skeptical the central bank would actually go through with it.
The move — which economists call “quantitative easing” — is aimed at effectively reduce market interest rates since the Fed’s key rate, the federal funds rate, has been ratcheted down as low as it can go.
According to preliminary calculations, the Dow Jones industrial average rose 90.88, or 1.2 percent, to 7,486.58.
Broader stock indicators jumped, too. The Standard & Poor’s 500 index added 16.23, or 2.1 percent, to 794.35, and the Nasdaq composite index rose 29.11, or 2 percent, to 1,491.22.
Stocks have risen for six out of the last seven days. Since the market rally began last week, the Dow has jumped 14.4 percent, and the S&P 500 has soared 17.4 percent.
The market traded lower ahead of the Fed’s decision.
Technology stocks, meanwhile, were lifted by news that International Business Machines Corp. is in discussions to buy Sun Microsystems Inc. for at least $6.5 billion in cash.