Fed surprise keeps stock rally going

Thursday, September 19, 2013 - 8:45am

Investors seemed to be a little hung over Thursday, but stocks continued to advance a day after the Federal Reserve's surprise decision to keep buying $85 billion in bonds a month lifted two key market indexes to all-time highs.

The Dow Jones industrial average was flat early Thursday, while the S&P 500 and Nasdaq edged only slightly higher. Still, the modest bump in the S&P 500 was enough to push it to a new all-time high. The Nasdaq is at its highest level since September 2000.

Global markets surged Thursday. London's FTSE 100 index lead the pack in Europe with a 1.4% gain. Japan's Nikkei closed 1.8% higher.

But the impact was particularly strong in emerging markets, where investors had been pulling their money and returning to the U.S. in search of higher yields. Indonesia's stock market surged almost 5%, while India's Sensex and the principal Philippines exchange jumped 3%.

Investors were happy that the Fed chose to not cut back on, or taper, the size of its bond buying program just yet. This so-called quantitative easing has been supporting stock markets around the world. Many had expected the Fed to announce on Wednesday that it would begin tapering.

"It appears that [policymakers at the Fed were] not in the mood to take any chances with the economic recovery underway," said Iain Stealey, a portfolio manager at J.P. Morgan. "Tapering is going to happen at some point, but it's going to be very data dependent."

Meanwhile, the U.S. dollar continued to edge lower versus other global currencies, after taking a big fall Wednesday.

And bond yields also continued to slide, extending the previous day's sharp drop, as investors bought more bonds. The 10-year Treasury yield fell below 2.7%. Prior to the Fed's announcement, the benchmark Treasury yield was trading near 2.9%.

On the economic front, U.S. jobless claims rose last week but still came in below expectations. Analysts were expecting a higher figure because the previous reading was distorted, as computer glitches caused two states to report incomplete results.

At 10 a.m., the National Association of Realtors will release its monthly report on existing home sales.

What's moving: Shares of Take-Two Interactiv jumped after the company said its latest game,Grand Theft Auto V, raked in $800 million in worldwide retail sales on the first day of its release Tuesday.

Rite Ai reported a quarterly profit, compared to its year-earlier loss, and raised earnings guidance for the year, reflecting a better-than-expected first half of the fiscal year. The drug store chain's stock surged 15% .

JPMorgan Chase agreed Thursday to pay about $920 million in fines to U.S. and U.K. regulators to settle charges related to the "London Whale" trading debacle.


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