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Dow rises 104 points to record high as Fed announces end to bond buying program

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Dow rises 104 points to record high as Fed announces end to bond buying program
The Dow Jones Industrial Average rose 104 points to a record high on Wednesday as the Federal Reserve announced plans to shutter its pandemic bond buying program. File Photo by John Angelillo/UPI | License Photo

Nov. 3 (UPI) -- U.S. markets rose to records on Wednesday as the Federal Reserve announced plans to slow its monthly pandemic bond purchases.

The Dow Jones Industrial Average gained 104.95 points, or 0.29%, while the S&P 500 rose 0.65% and the Nasdaq Composite increased 1.04% as the Federal Open Market Committee announced it will reduce its purchases by $10 billion for treasury securities and $5 billion for agency mortgage-backed securities beginning later this month.

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In the statement from the meeting, the central bank also acknowledged that inflation has been more rapid and persistent than they had expected but continued to describe the rise in prices as "transitory."

"Our decision today to begin tapering our asset purchases do not imply any direct signal regarding our interest rate policy," Fed Chairman Jerome Powell said. "We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate," Fed Chairman Jerome Powell said in a news conference following the meeting.

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Ian Shepherdson, chief economist at Pantheon Macroeconomics wrote ahead of the meeting that investors will continue to watch whether the Fed shifts on inflation.

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"The Fed's credibility will be enhanced if Mr. Powell does not have to return to the press conference platform in December, January and March and again have to explain why inflation has risen even further," said Shepherdson. "The danger has increased that the Fed will be forced into faster tapering in an insurance hike next spring, or even a sustained inflation-chasing tightening later in the year."

Another wave of corporate earnings also helped to boost the market as Lyft stock gained 8.19% and CVS Health rose 5.71% as both reported better-than-expected earnings.

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Shares of Bed Bath & Beyond also surged up 15.22% after the retailer announced a partnership with grocery chain Kroger.

On the contrary, shares of Zillow tanked 22.93% after the company announced it would shutter its home buying and flipping business and cut 25% of its workforce, while video game-maker Activision dropped 14.06% after delaying the release of two games and issuing a lower than expected holiday outlook.

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