Stocks moved higher on Wednesday, even after a reduction in
monetary stimulus measures was announced by the Federal Reserve.
The Fed said it was certain the economy was strong enough so that
it could effect a modest taper to its stimulus program. The Dow
and S&P 500 also finished at new record highs on the day. All
the sectors in the S&P 500 industry groups ended in the
green, with the health care sector leading the pack.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) gained about 1.8% to close
the day at 16,167.97 exceeding its previous record high. The
S&P 500 rose 1.7% to finish yesterday's trading session at
1,810.65, also a record high. The tech-laden Nasdaq Composite
Index increased 1.2% to end at 4,070.06. The fear-gauge CBOE
Volatility Index (VIX) plunged down 14.9% to settle at 13.80.
Consolidated volumes on the New York Stock Exchange, American
Stock Exchange and Nasdaq were roughly 2.3 billion shares.
Advancing stocks outnumbered the decliners. For 75% shares that
advanced, only 22% declined.
Benchmarks marched higher on the day, with the Dow and S&P
500 setting all-time closing records, even as the Federal Reserve
announced it was beginning to taper its monetary stimulus
measures. The taper decision surprised a few market watchers and
other active participants. However, the decision to some extent
provided signs of a stronger U.S. economy.
The central bank said a reduction of $10 billion will be
initiated, bringing the stimulus to $75 billion a month from
January, 2014. At the same time, the Fed also indicated that the
key interest rate would continue to remain at a record low longer
than what was promised previously. The central bank said it
"likely will be appropriate" to preserve overnight rates close to
nil "well past the time" even if the unemployment rate drops
Speaking at a news conference, Federal Reserve Chairman Ben
Bernanke said the central bank would introduce similar steps in
its upcoming Federal Open Market Committee meetings in the future
as well. Bernanke said such reductions would continue if economic
data continued to remain positive. He said Fed would continue to
main low borrowing rates in order to increase spending and propel
growth. At the same time, such moves were aimed at pushing up the
low levels of inflation, he added.
According to the US Department of Commerce, housing starts for
the month of November came in at 1,091,000, 22.7% above the
revised October estimate of 889,000. This is the highest level
recorded in the past six years and considerably more than the
consensus estimate of 959,000. The figure is also 29.6% above the
November 2012 rate of 842,000.
Building permits were at a seasonally adjusted annual rate of
1,007,000, 3.1% below the revised October rate of 1,039,000.
However, they are also 7.9% above the November 2012 estimate of
933,000. Privately-owned housing completions in November were at
a seasonally adjusted annual rate of 823,000. This is 0.1% below
the revised October estimate of 824,000. However, the figure is
21.6% above the November 2012 rate of 677,000.
The health care sector was the maximum gainer among the S&P
500 industry groups. The Health Care SPDR (XLV) gained 2.5%.
Stocks such as Johnson & Johnson (NYSE:
), Pfizer Inc. (NYSE:
), Merck & Co., Inc. (NYSE:
), Gilead Sciences, Inc. (NASDAQ:
), and Bristol-Myers Squibb Co (NYSE:
) gained 2.2%, 2.1%, 2.1%, 5.0%, and 2.9%, respectively.