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U.S. Stocks rise as Fed announced small cut on federal stimulus

December 18, 2013 , , , ,

U.S. Stocks Rise to Record After Fed Plans Stimulus Cuts

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Today – Wednesday, December 18th, 2013

  • U.S. stocks rallied today as Fed announced it’s cutting back on its stimulus by $10 Billion from 85Billion to now $75Billion per month. Oddly this would set the stock market falling, but the reason stocks rallied today was because first it’s only $10 Billion and it’s not starting till January. Fed also announced that they will stay at this current level till unemployment drops below 6.5%. Also Fed announced that they will keep interest rates low for loans at this current level, because The Fed’s low interest rates have prompted consumers to buy homes or refinance existing mortgages, sparking a recovery in the housing market that was at the center of the financial crisis.
  • Investors and the public were thinking that the tapering of the stimulus would be immediately and it would but in huge differences, but it’s only $10 Billion cut and it’s starting in January. Thus bringing confidence, certainty and so the investors and public aren’t confused.
  • To concluse, since the taper is not huge and aggressive, and the forward guidance is dovish, we get a rally in equities.
  • The S&P 500 popped 1.7% to 1,810.71, a record closing high. The Dow Jones Industrial Average surged 1.9% to 16,168.29, which was also an all-time closing high for the index. The Nasdaq finished up 1.2% to 4,070.06.
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