Dow, S&P 500 end at record highs as Fed leaves stimulus intact

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#1
surprised - QE taper-not.

QE3 was originally intended to avoid the spillovers from the sequester in Dec12 and now, it seems to be needed to avoid the traumas of the debt ceiling in Oct13. The admin's inability to resolve conflicts is a comedy.

What is clear is the weakness of the Obama's admin - the lack of political capital is reflected in Summer's withdrawal, Syria's debacle
and certainly does not augur well for the fiscal actions for the next 2 years remaining on the Democrat's term.

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NEW YORK (Reuters) - U.S. stocks rallied to record highs on Wednesday after the Federal Reserve, in a surprise to markets, decided against scaling back a stimulus program that has helped fuel Wall Street's rally of more than 20 percent this year.
Stocks were lower before the announcement, but after the Fed announced it would continue buying bonds at an $85 billion monthly pace for now, the Dow and S&P 500 indexes quickly climbed to all-time highs.
While equities jumped on the Fed's decision, questions remained how long the rally would last as the central bank expressed concerns about the economy's future growth with likely budget and debt limit battles in Washington to come.
Market participants had largely been expecting the central bank, after a two-day meeting of its policy-setting committee, 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."
In a news conference following the announcement, Fed Chairman Ben Bernanke said the plan is to maintain a highly accommodative policy, with the central bank looking to see if its basic outlook for the economy is confirmed. Only then would the U.S. central bank take the first step to remove the stimulus.
The Dow Jones industrial average <.dji> rose 147.21 points or 0.95 percent, to 15,676.94, the S&P 500 <.spx> gained 20.76 points or 1.22 percent, to 1,725.52 and the Nasdaq Composite <.ixic> added 37.942 points or 1.01 percent, to 3,783.641.
The S&P's previous closing high was 1,709.67 and the Dow's was 15,658.36, both on August 2.
About 580 stocks on the NYSE and Nasdaq hit new 52-week highs on Wednesday. About 325 of them hit their highs after the Fed announcement. Priceline.com Inc hit an intraday high of $1001, the first S&P 500 company in history to reach that landmark level. Shares in the online travel agency closed up 2.6 percent at $995.09.
The Fed also lowered its forecasts for economic growth. It 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 percent to 3.1 percent compared with 3.0 percent to 3.5 percent.
Separately, a White House official said Federal Reserve Vice Chairwoman Janet Yellen was the front runner to take over the top job at the U.S. central bank when Bernanke's term ends in January, the strongest indication yet of her likely nomination.
Materials stocks rallied as the U.S. dollar fell to a seven-month low and gold rallied after the announcement. Newmont Mining Corp surged 8.2 percent to $30.87 and the S&P materials index <.splrcm> gained 2.3 percent.
Homebuilder stocks also jumped on expectations the Fed's stimulus would put downward pressure on mortgage rates and provide a boost to the housing market recovery. Lennar Corp advanced 6.5 percent to $37.33 and D.R. Horton Inc jumped 6.9 percent to $21.33. The PHLX housing index <.hgx> gained 4.3 percent.
"People are clearly surprised and the thinking now is the Fed is going to make sure the economy is on even sounder footing before they start backing off on these purchases," said Doug Foreman, co-chief investment officer at Kayne Anderson Rudnick Investment Management in Los Angeles.
"This is unequivocally good for interest-rate sensitive stocks, which had been bracing for impact for several months now."
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#2
Reits going to sky again.
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#3
Ok let me get this straight

Fed is not tapering QE because the economy is not looking so great, and it needs more life support. That means that fundamentals are still shaky.

Stock market ignores the underlying reality and rallies because QE means more cheap money

Big Grin
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#4
So the Feb decided to postpone the tapering. Isn’t this just kicking the can down the road? Since the Feb can’t scale down its stimulus program now, I will scale down my stock holding, albeit at an orderly manner Big Grin
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#5
Ben (the one in US) ROD (or ORD nowadays) mood... this big problem will not be his soon... Hee.. Big Grin
A good opportunity for us to do some spring cleaning....Tongue
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#6
And the party continues......for nowBig Grin

Good luck to Janet Yelen Angel

(19-09-2013, 11:15 AM)Ben Wrote: I will scale down my stock holding, albeit at an orderly manner Big Grin

What do u mean by 'orderly manner'?Huh
My Dividend Investing Blog
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#7
to be honest i am rather disappointed - much prefer if they get the taper out of the way esp after the world had 4mths to prepare for it since May
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#8
(19-09-2013, 11:06 AM)Janjansen Wrote: Ok let me get this straight

Fed is not tapering QE because the economy is not looking so great, and it needs more life support. That means that fundamentals are still shaky.

Stock market ignores the underlying reality and rallies because QE means more cheap money

Big Grin

yes agree and not tapering is a huge surprise. Fed is saying "new normal"... markets think "party not over". Can't say the policy makers have not pre-warned.

Nonetheless the closest to "new normal" I can think of is Japan, excluding the demographics impact. And Japan trades at around 20XPE
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#9
new norm indeed - projections of a long run gdp of 2.2-2.5% and inflation of 2%

http://www.federalreserve.gov/monetarypo...130918.pdf

perhaps the better way to view it is that the "norm" during the good days of Greenspan-era is over - the debt buildup/leverage employed will not be allowed going fwd
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#10
investors are too addicted in QE
and the party continues~
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