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Nov. 3, 2021, 4:26 p.m. EDT

U.S. stocks end at records after Fed says economy recovering and tapering of bond purchases will start this month

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By Joy Wiltermuth and William Watts

U.S. stocks finished higher in record territory Wednesday, after the Federal Reserve acted as expected by announcing its plans to start tapering its $120 billion in monthly bond purchases later this month.

In a statement Wednesday, the Fed said it would r educe the pace of purchases by $15 billion per month , but said tapering is not on a preset patch.

How did stock index trade?

  • The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.08% added 104.95 points, or 0.3%, after flipping positive to close at a record 36,157.58.

  • The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.39% gained 29.92 points, or 0.7%, ending at a record 4,660.57.

  • The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.20% added 161.98 points, or 1%, finishing at an all-time high of 15,811.58.

  • The small-cap Russell 2000 /zigman2/quotes/210598147/delayed RUT -0.52% added 1.8%, to close at a record.

On Tuesday , the Dow closed above 36,000 for the first time , while the S&P 500 and Nasdaq Composite also closed at records. They were joined in record territory by the small-cap Russell 2000 /zigman2/quotes/210598147/delayed RUT -0.52% , which logged its first record finish since March 15.

Need to Know: The ‘Dow 36,000’ authors weren’t just 17 years late. Here’s the key mistake they made

What drove the market?

Stocks pushed further into record territory, after the Federal Reserve’s decision on Wednesday to join other central banks in starting to reduce pandemic monetary aid.

The decision by Chairman Jerome Powell and his colleagues was no surprise, with investors largely expecting confirmation of the start of a reduction in its bond purchases .

To kick things off, the Fed plans to start reducing its footprint in financial markets later this month, by trimming $15 billion off its prior $120 billion monthly rate of bond purchases. The central bank also indicated it will be flexible in its path of tapering going forward, while anticipating its balance sheet, currently near $8.6 trillion , would cease growing by mid-next year.

U.S. Treasury debt yields ticked up, in reaction, while the three major U.S. stock indexes swept to a fourth straight day of record closes, the most since Oct. 5, 2017, according to Dow Jones Market Data.

“That’s in anticipation of tighter monetary policy,” said Michael Arone, managing director of State Street Global Advisors, in a phone interview.

Small cap-stocks also expanded their gains, he said, noting the this segment of the stock market also performed well the the last time the Fed announced tapering. “The Fed is signaling to investors they anticipate the economy to be on pretty firm footing and likely to be better,” Arone said.

Powell, in an afternoon news conference, said the central bank can be patient on increasing policy interest rates, while also noting that maximum employment could be achieved by the second half of 2022, a requirement for any rate hike.

The Fed Chair also said inflation, a key concern for investors, was tied less to higher wages than supply-chain bottlenecks.

See : Fed still thinks surging U.S. inflation won’t last, but it’s now hedging its bets

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
32,223.42
+26.76 +0.08%
Volume: 332.70M
May 16, 2022 5:14p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,008.01
-15.88 -0.39%
Volume: 2.21B
May 16, 2022 5:14p
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/zigman2/quotes/210598365/realtime
US : Nasdaq
11,662.79
-142.21 -1.20%
Volume: 4.29M
May 16, 2022 5:16p
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/zigman2/quotes/210598147/delayed
US : US Composite
1,783.43
-9.24 -0.52%
Volume: 1.86M
May 16, 2022 6:52p
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/zigman2/quotes/210598147/delayed
US : US Composite
1,783.43
-9.24 -0.52%
Volume: 1.86M
May 16, 2022 6:52p
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