Wall Street hits new highs as Fed keeps stimulus intact

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks rallied to a record high on Wednesday after the Federal Reserve surprised investors by saying it would not begin to cut its bond-buying program that has been a driving force behind Wall Street's climb of more than 20 percent this year.

After a mostly quiet session leading up the announcement, the S&P 500 showed a gain of nearly 1 percent after the central bank would continue buying bonds at an $85 billion monthly pace for now.

Market participants had largely been expecting the central bank to begin a withdrawal of the bond-buying program by about $10 billion a month.

"No taper, the market loves it, we will see if that lasts but boy, we are off to the races," said Brad McMillan, Chief Investment Officer for Commonwealth Financial in Waltham, Massachusetts.

"From a short term stock market perspective it can be seen as a good thing because the market likes to see continued Fed stimulus. From a real economy standpoint, what it says is the Fed is actually more nervous about the economy than is generally perceived."

The Dow Jones industrial average rose 109.28 points or 0.7 percent, to 15,639.01, the S&P 500 gained 15.54 points or 0.91 percent, to 1,720.3 and the Nasdaq Composite added 26.887 points or 0.72 percent, to 3,772.586.

The Fed now sees growth in a 2 percent to 2.3 percent range this year, down from 2.3 percent to 2.6 percent in its June estimates. The downgrade for next year was even sharper: 2.9 to 3.1 percent, from 3.0 to 3.5 percent.

A White House official said Federal Reserve Vice Chair Janet Yellen is the front runner to take over the top job at the U.S. central bank when Ben Bernanke steps down, the strongest indication yet of her likely nomination.

Materials stocks rallied as the dollar fell to a seven-month low versus the euro and gold rallied after the announcement. Newmont Mining Corp jumped 5 percent to $29.95 and the S&P materials index gained 1.9 percent.

Looking beyond the Fed, market participants had an eye on the looming budget and debt limit debate in Washington. The White House said Wednesday the latest Republican proposal moves away from compromise.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

Matches

MORE TOP STORIES TODAY

On Now: Kolkata vs Bangalore

On Now: Kolkata vs Bangalore

IPL 7, GAME 11—Bangalore bowl, Murali in, still no Gayle. KKR bring in Umesh, Lynn. More »

Kolkata bowling vs Bangalore batting might

Kolkata bowling vs Bangalore batting might

The likely return of Gayle will boost Bangalore, but the result could be determined by Kolkata's bowlers. More »

Boycotting IPL will not save cricket

Boycotting IPL will not save cricket

Boycotting the IPL as a means of protest against the grime in the game may not yield the desired results. More »

Gambhir a knock away from striking form - KKR coach

Gambhir a knock away from striking form - KKR coach

Gautam made an eight-ball duck in the opening game against Mumbai and in the second game against Delhi, he lasted only half those balls. More »

Rivals say Srini group delaying BCCI special general meeting

Rivals say Srini group delaying BCCI special general meeting

The group opposed to Srinivasan alleged that since BCCI secretary Sanjay Patel belongs to the president’s group, he was intentionally delaying the SGM… More »

April 24: A legend is born

As Sachin Tendulkar turns 41 - here's a look at some offbeat moments from the Master Blaster's innings. More »

Jadeja spins out Rajasthan in close chase

Jadeja spins out Rajasthan in close chase

IPL 7, GAME 10—Chennai beat Rajasthan by 7 runs after last-over scare. More »

Cleaning up the game starts with fans

Cleaning up the game starts with fans

... because, as recent events reveal, the BCCI has little intention of doing it. More »

SL in 'difficult place' after Farbrace exit

SL in 'difficult place' after Farbrace exit

Sri Lanka depart for assignments in Ireland and England in two weeks, and Sanath Jayasuriya suggested Marvan Atapattu would be interim head coach for those… More »

Vithanage, Priyanjan get T20 call-ups

Vithanage, Priyanjan get T20 call-ups

Herath has been rested, while the team will be without the veteran pair of Mahela Jayawardene and Kumar Sangakkara, who retired from T20 internationals… More »

Chandimal axed as T20 captain

Chandimal axed as T20 captain

Sri Lanka's cricket selectors on Wednesday sacked Dinesh Chandimal as Twenty20 captain and replaced him with Lasith Malinga, while Angelo Mathews was… More »

'BCCI should have picked panel with care'

'BCCI should have picked panel with care'

Dalmiya said that it was the first time that the BCCI had been faced with a situation where the apex court had hauled up the Board and it should have acted… More »

Farbrace is England's assistant coach

Farbrace is England's assistant coach

The ECB continued the restructuring of the England coaching set-up on Wednesday by announcing the appointment of Paul Farbrace as assistant coach. More »

SC asks Mudgal committee to continue

SC asks Mudgal committee to continue

Mukul Mudgal has communicated to the court his willingness to take up the investigation and has been asked to specify the terms and modalities on April… More »

Sri Lanka players resolve pay dispute

Sri Lanka players resolve pay dispute

The pay dispute between Sri Lanka Cricket and its 13 contracted players ended on Wednesday when the latter agreed to accept 10 percent of the participation… More »

Hope to be fit for next game - Pietersen

Hope to be fit for next game - Pietersen

With two heavy defeats at the hands of Bangalore and Chennai, Daredevils currently languish near the bottom of the table. More »

'SC decision could hurt BCCI's status'

'SC decision could hurt BCCI's status'

The Supreme Court prefers that the Justice Mudgal panel further investigate the IPL corruption scandal. More »

Mudgal panel drops bombshell in court

Mudgal panel drops bombshell in court

The Mukul Mudgal probe committee dropped a bombshell in the Supreme Court on Tuesday by making a sensational claim that it was forced to stop audio recording… More »

Perfect Punjab trounce Hyderabad

Perfect Punjab trounce Hyderabad

IPL7, GAME 9—Maxwell (95, 43b), Balaji (4-13) set up 72-run win. More »

Have the ECB played an unfair game?

Have the ECB played an unfair game?

Money talks, but it is in light of this ICC shakeup that the ECB's act of soliciting of another team's coach deteriorates from free-market aggression to… More »

Farbrace quits for England post

Farbrace quits for England post

He will assist Peter Moores who was unveiled as the new England coach on Saturday. More »

Moin appointed to manage Pakistan team

Moin appointed to manage Pakistan team

Pakistan on Monday reappointed Moin Khan as chief selector and manager of the national team, a week after fellow former captain Rashid Latif turned down… More »

Chennai smash Delhi for first win

Chennai smash Delhi for first win

IPL7, MATCH 8—Raina-led middle order, superlative catching give CSK a 93-run win. More »

'BCCI reputation lowest in 80 years'

'BCCI reputation lowest in 80 years'

The former BCCI president says he was "disillusioned" by the happenings at the emergent working committee meeting on Sunday. More »