Markets rise after Fed announcements
Markets were mixed Wednesday, Jan. 25, 2012, awaiting reports from the Federal Reserve due out in the afternoon. (Jan. 18, 2012) Credit: AP
The stock market bounced to its highest close since May Wednesday after the Federal Reserve pledged to keep interest rates near zero for almost three more years.
Bond yields dropped sharply, then climbed back later in the day when investors began looking more closely into the Fed's deliberations. The yield on the five-year Treasury note touched an all-time low.
The big moves in both markets came after the Fed's monetary policy committee said it was unlikely to raise interest rates before late 2014. It had previously promised to keep rates low into the middle of 2013.
The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there ever since. The announcement was a sign that the Fed expects the economy, which is improving, to need significant help for three more years.
The Dow Jones industrial average was down as much as 95 points Wednesday morning and about 60 points before the announcement. It shot to a gain of 103 points in the afternoon.
The Dow closed up 81.21 points, or 0.64 percent, at 12,756.96. The Standard & Poor's 500 index was up 11.41, or 0.87 percent, to 1,326.06. The Nasdaq composite index rose 31.67, or 1.14 percent, to 2,818.31.
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