US stocks rally on Fed bond-buying plan

by **hlk** Fri 14 Sep 2012, 08:45

WASHINGTON: US stocks soared on Thursday after the Federal Reserve
announced a new QE3 bond-buying programme focused on boosting jobs and
pulling the housing market back to life.

After trading flat
before the Fed's announcement, the Dow Jones Industrial Average ended
up 206.51 points (1.55 percent) at 13,539.86.

The SandP
500-stock index added 23.43 points (1.63 percent) to 1,459.99, while
the tech-rich Nasdaq gained 41.52 points (1.33 percent) to 3,155.83.

The
Federal Reserve announced a new programme of purchasing $40 billion a
month in mortgage-backed bonds aiming at dragging down long-term
interest rates.

It also pledged to keep its current ultra-low
benchmark interest rate in place through mid-2015, and said it would
continue its monetary easing efforts until it saw substantial
improvement in the jobs market.

"Despite the fact that
additional Fed easing was largely baked into financial asset prices
recently, markets cheered the news," said Paul Edelstein, an economist
at IHS Global Insight.

"US equity markets added roughly one
percent following the statement. Counter-intuitively, however, bond
prices fell, sending yields higher."

"It's unusual for the
market to rally like that on news that's expected, but I think it was
the nature of the Federal Reserve announcement, the aggressive size of
the quantitative easing that was announced," said Chris Low of FTN
Financial.

"Also the fact that it was open-ended, which changes
the range of future possibilities, all of that together was very, very
stimulative for the stock market."

Banks were big beneficiaries,
with Bank of America up 4.8 percent and JPMorgan Chase 3.7 percent,
Citigroup 4.2 percent and Wells Fargo 3.6 percent.

Housing
shares took a big jump from the news, with builder Hovnanian up 3.3
percent, Comstock up 6.2 percent, Lennar 1.7 percent and Standard
Pacific 3.7 percent.

Mining shares followed gold and other
minerals higher, with Freeport McMoran jumping 4.3 percent, Newmont
Mining up 5.2 percent and Barrick Gold, 4.8 percent.

Apple
shares meanwhile pushed up 2.0 percent to its highest closing price
ever, US$682.98, after launching the ultra-sleek iPhone 5 to positive
reviews. -- AFP