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Overnight Markets: US stocks surge after Fed trims stimulus

by Himanshu Singh on Dec 19, 2013 at 03:51

Overnight Markets: US stocks surge after Fed trims stimulus

US stocks rose sharply on Wednesday, sending benchmark indexes to record highs, as the Federal Reserve announced it would start to unwind its historic stimulus while still promising to hold interest rates close to zero.

The Dow Jones industrial average surged 293 points or 1.84%, to end at 16,168, a record closing high. The S&P 500 gained 30 points or 1.66%, to finish at 1,811, also a record closing high. The Nasdaq Composite climbed 46 points or 1.15%, to close at 4,070.

Fed confirmed yesterday that the US economy was on firmer footing and put to rest the question of when the central bank would begin to scale back its bond-buying programme.

The central bank said it would cut its monthly asset purchases by $10 billion to $75 billion, while it also indicated that its key interest rate would stay at rock bottom even longer than previously promised.

Shares extended losses just after the announcement, but quickly turned higher and began rallying.

Energy companies' stocks helped lead both the Dow and the S&P 500 higher as oil prices gained. Exxon Mobil gained 2.9%.

Shares of Lennar Corp (LEN.N) jumped 6.3% after the No. 3 US homebuilder reported a 32% jump in fourth-quarter profit. Data on Wednesday showed that US housing starts increased to the highest in nearly six years in November.

Tech shares declined with Jabil Circuit Inc (JBL.N) tumbling 20.5% a day after it forecast current-quarter results way below Wall Street's estimates. Apple Inc (AAPL.O) 0.8%.

Shares of Ford Motor Co (F.N) dropped 6.3% after the No. 2 US automaker warned on Wednesday that the cost of launching new vehicles would take a bite out of its 2014 pretax profit.

In Asia, shares gained on Thursday after the Fed expressed enough confidence in the US labour market to taper asset purchases.

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