REUTERS/James Lawler Duggan
U.S. Federal Reserve Chairman Ben Bernanke takes his seat prior to delivering his semi-annual monetary policy report to Congress before the House Financial Services Committee in Washington, July 17, 2013.
First, the scoreboard:
- Dow: 15,685.8, +156.1 +1.0%
- S&P 500: 1,725.8, +21.2, +1.2%
- NASDAQ: 3,783.5, +37.8, +1.0%
And now the top stories:
- No taper. The Federal Open Market Committee (FOMC) shocked the markets by announcing that it would continue its monthly purchases of $85 billion worth of Treasury Securities and mortgage bonds. Most economists were looking for a reduction, or tapering, of around $5 to $10 billion dollars.
- "The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market," said the Fed in its FOMC statement.
- Markets went nuts. The Dow and S&P 500 surged to new all-time highs. The interest rates collapsed, the dollar tanked, and gold surged.
- During the post-FOMC press conference, Fed Chairman Bernanke said that the tightening of monetary policy (i.e. raising the Fed's benchmark rate) may not begin until the unemployment rate is considerably below 6.5%. He also said that an inflation rate floor could be a sensible modification to its forward guidance policy.
- "The initial Fed tapering is likelier to occur in December when updated forecasts are released, rather than October," said Deutsche Bank's Joe LaVorgna after the news.
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