By Miles Moore, Senior Washington reporter and Hazel Bradford, Crain News Service
WASHINGTON (Sept. 18, 2013) — The Dow Jones Industrial Average closed at a record high Sept. 18 after the Federal Reserve's Federal Open Market Committee announced it would continue purchasing government bonds for the time being.
The Dow closed up 147 points at 15,676. The NASDAQ closed up 37 points at 3,783, its highest daily finish since September 2000.
At the conclusion of the Sept. 17-18 FOMC meeting, it had been expected the Federal Reserve would begin tapering off its monthly purchase of $40 billion worth of mortgage-backed securities and $45 billion worth of longer-term Treasury securities.
Although this move was expected because of improvements in the U.S. economy, the stock market was poised to fall at this announcement.
However, the FOMC disclosed it would continue buying bonds at the current pace.
"The committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the market economy," the FOMC said.
"The committee decided to await more evidence that the economic recovery will be sustained," Chairman Ben S. Bernanke said at a news conference after the meeting. "The economic data do not yet provide sufficient baseline information."
"They took the conservative option here, which was to push back the taper decision and thereby ensure that the market would not tighten conditions further," said Robert Tipp, managing director and chief investment strategist at Prudential Fixed Income.
Mr. Bernanke pointed out several signs of progress, including 3.2 million jobs added, "despite substantial headwinds," and said that conditions to warrant asset purchase tapering might be met through this year and into 2014.
Mr. Bernanke noted a range of views held by committee members. Of the 17 members, 12 expect the first rate increase to take place in 2015, and most members expect it will rise "very slowly." The median projetion was for the federal rate to rise to 1 percent in 2015, and 2 percent in 2016.
"They're pushing off the timing of tapering and signaling what will be a very slow rate hike cycle," said Prudential's Mr. Tipp. "The bottom line is this should be very market positive — for equities and fixed-income sectors."