New York Report: Fed’s surprise drives Wall St to record highs

US stocks rallied to record highs yesterday after the Federal Reserve, in a surprise to markets, decided against scaling back a stimulus programme that has helped fuel Wall Street’s rally of more than 20 per cent this year.

Stocks were lower before the announcement, but after the Fed announced it would continue buying bonds at an $85bn monthly pace for now, the Dow and S&P 500 indexes quickly climbed to all-time highs.

While equities jumped on the Fed’s decision, questions remained how long the rally would last as the central bank expressed concerns about the economy's future growth with likely budget and debt limit battles in Washington to come.

Market participants had largely been expecting the central bank, after a two-day meeting of its policy-setting committee, to begin a withdrawal of the bond-buying program by about $10 billion a month.

“No taper, the market loves it. We will see if that lasts but boy, we are off to the races,” said Brad McMillan, chief investment officer for Commonwealth Financial.

The Dow Jones industrial average rose 147.21 points or 0.95 per cent, to 15,676.94, the S&P 500 gained 20.76 points or 1.22 per cent, to 1,725.52 and the Nasdaq Composite added 37.942 points or 1.01 per cent, to 3,783.641.

The S&P’s previous closing high was 1,709.67 and the Dow’s was 15,658.36, both on 2 August.

About 580 stocks on the NYSE and Nasdaq hit new 52-week highs yesterday. About 325 of them hit their highs after the Fed announcement.