Dow Ends Up 26, Nasdaq Gains 7

Stocks posted modest gains after the Federal Reserve announced details of its plan to stimulate the economy.

NEW YORK (AP) — The Dow Jones industrial average reached a new high for the year after the Federal Reserve announced that it plans to buy $600 billion in Treasurys to stimulate the economy. The aim is to drive interest rates lower in an effort to spark spending and lending.

The Dow Jones industrial average gained 26.41, or 0.2 percent, to 11,215.13, its highest close in two years. Its previous high for 2010 of 11,205 was reached on April 26. The Dow had traded above that level four other times in the past two weeks.

Broader indexes also rose. The Standard and Poor’s 500 Index rose 4.39, or 0.4 percent, to 1,197.96, while the Nasdaq composite gained 6.75, or 0.3 percent, to 2,540.27.

The central bank had hinted for two months that it planned to buy bonds in an effort to boost the economy. The Fed made firmer commitments to buy bonds under the new program than many investors had been expecting, which helped push stock indexes and most Treasury prices higher.

Instead of reassessing its bond purchases every month given economic conditions, as many expected, the Fed pledged to buy $75 billion of Treasurys each month through the middle of next year.

Stocks initially swung lower after the announcement as traders absorbed the news but then pushed steadily higher in afternoon trading, giving all three indexes gains of about 0.3 percent on the day.


Mid-term election results that delivered a solid majority to the Republicans in the House of Representatives but kept Democratic control of the Senate was in line with what most investors were expecting.

The Fed’s announcement was unusually direct for the central bank, which cleared the way for many investors to step back into the market.

“The Fed’s move takes a lot of uncertainty out of the air,” said Anthony Chan, the chief economist for JP Morgan Chase’s private wealth management division. “This puts a floor on the economy’s performance and gives them the opportunity to do more if the economy needs it.”

The Dow’s previous highest closing level of the year, which was 11,205.03 on April 26. The index is now at a level that it last reached during the financial crisis in September 2008. Hewlett Packard Co. rose 2.1 percent to post the largest gain among the 30 companies that make up the index. Microsoft Corp.’s 1.4 percent fall made it the Dow’s laggard.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, remained at 2.59 percent. The yield on the 30-year bond, which won’t be targeted by the Fed’s bond-buying program nearly as much as investors had hoped, rose to 4.06 percent from 3.93 percent late Tuesday.

Key economic reports that would have normally affected trading were overshadowed by the Fed’s meeting.

Payroll company ADP said private employers added 43,000 jobs last month after cutting jobs in September, which usually would have driven buying in the market. The report is seen as a gauge heading into the government’s monthly employment report, which is due out Friday.

The Institute for Supply Management said growth in the service sector accelerated last month when economists were expecting a slowdown in the pace of expansion. That too would normally have provided stocks a lift.

The ISM report is closely watched because the service sector accounts for about 80 percent of the nation’s jobs. Earlier this week, ISM said the growth in the manufacturing activity also accelerated last month.

Comments (0)

Leave a Reply

More News