NEW YORK (AP) — The stock market hit a record high Wednesday as investors cheered the Federal Reserve's surprise decision to keep its economic stimulus program in place.
Stocks traded slightly lower throughout the morning, but took off immediately after the Fed's decision in the early afternoon. Bond yields fell sharply — their biggest move in nearly two years. The price of gold had its biggest one-day jump in four years as traders anticipated that the Fed's decision might cause inflation.
Fed policymakers decided to maintain the central bank's $85 billion in monthly bond buying, a program that had been in place in one form or another since late 2008. The program is designed to keep interest rates low to spur economic growth and has been a driver of the four-and-a-half-year bull run in stocks.
While the U.S. economy appeared to be improving, the bank's policymakers "decided to await more evidence that progress will be sustained" before deciding to slow the bond purchases. The bank also cut its full-year economic outlook for this year and next.
Stock traders shrugged off the Fed's dimmer outlook and focused on the prospect of continued stimulus.
The S&P 500 surged 20.76 points, or 1.2 percent, to 1,725.52, slicing through its previous all-time high of 1,709.67 set on Aug. 2.
The Dow Jones industrial average jumped 147.21 points, or 1 percent, to 15,676.94, also above its previous record high of 15,658.36 from Aug. 2.
The Nasdaq composite rose 37.94 points, 1 percent, to 3,783.64.
The fate of the Fed's economic stimulus program has been the biggest question on Wall Street for months. It was widely expected that the Fed would cut back on its bond buying at the September meeting.
Tom di Galoma, a bond trader at ED&F Man Capital, said he was "completely shocked" that the Fed decided to wait.
Some investors advised caution, even as the stock market hit all-time highs.
While the Fed's decision is positive for the market in the short term, "investors need to take a step back and consider the idea that maybe the U.S economy is on weaker footing than we originally thought," said Marc Doss, regional chief investment officer for Wells Fargo Private Bank.
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