Stocks Close Sharply Higher On The Heels Of Fed Statement - U.S. Commentary

(RTTNews) - Stocks saw substantial volatility following the release of the Federal Reserve's monetary policy announcement but managed to end the day sharply higher. The rally lifted the Dow to a three-month closing high, while the Nasdaq and the S&P 500 reached their best levels in over two months.

The major averages saw further upside going into the close, ending the session at their highs for the session. The Dow jumped 198.09 points or 1.1 percent to 17,779.52, the Nasdaq soared 65.54 points or 1.3 percent to 5,095.69 and the S&P 500 surged up 24.46 points or 1.2 percent to 2,090.35.

After trading higher for much of the session, stocks initially pulled back in reaction to the Fed statement before showing a strong upward move late in the session.

Following a two-day meeting, the Fed left interest rates unchanged as expected and reiterated its assessment that economic activity has been expanding at a moderate pace.

The central bank's statement was widely interpreted as suggesting that a December rate hike remains on the table.

Many analysts pointed to the fact that the Fed removed a reference to global economic and financial developments potentially restraining economic activity.

The Fed's explicit indication that it will assess progress towards its objectives of maximum employment and 2 percent inflation in determining whether it will be appropriate to raise rate at its "next meeting" was also highlighted.

"The post-FOMC meeting statement released today certainly leaves open the possibility that the Fed will hike interest rates at the next meeting in December," said Paul Ashworth, Chief U.S. Economist at Capital Economics. "Nevertheless, we still think that the Fed is more likely to wait until early next year."

Earlier in the session, stocks reacted positively to earnings news from Apple (AAPL), as the tech giant reported upbeat fiscal fourth quarter results after the close of trading on Tuesday.

Apple reported fourth quarter earnings and revenues that exceeded estimates, benefiting from strong iPhone sales, particularly in China. Shares of Apple are up by 2.4 percent on the news.

Northrop Grumman (NOC), Boston Scientific (BSX), and Starwood Hotels (HOT) also showed strong moves to the upside after reporting better than expected quarterly earnings.

On the other hand, shares of Twitter (TWTR) closed lower after the social media giant reported better than expected third quarter results but provided disappointing fourth quarter revenue guidance.

Sector News

Financial stocks saw substantial strength on the heels of the Fed announcement, driving the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index up by 3.9 percent and 3.5 percent, respectively. Both indexes reached their best closing levels in two months.

BGC Partners (BGCP), Cullen/Frost Bankers (CFR), and Bank of America (BAC) turned in some of the sector's best performances.

Considerable strength was also visible among networking stocks, as reflected by the 3.4 percent jump by the NYSE Arca Networking Index. The gain lifted the index to a fourteen-year closing high.

Infinera (INFN) helped to lead the networking sector higher, surging up by 15.4 percent after reporting better than expected third quarter results.

Energy stocks also saw significant strength on the day, moving higher along with the price of crude oil. Crude for December delivery soared $2.74 to $45.94 a barrel after a government report showed that gasoline and distillate fuel inventories fell last week.

Computer hardware, housing, semiconductor, and drug stocks also saw significant strength, while notable weakness was visible among trucking, utilities, and gold stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday. Hong Kong's Hang Seng Index fell by 0.8 percent, and Australia's All Ordinaries Index edged down by 0.2 percent. However, Japan's Nikkei 225 Index bucked the downtrend and climbed by 0.7 percent.

Meanwhile, the major European markets moved back to the upside on the day. While the French CAC 40 Index advanced by 0.9 percent, the U.K.'s FTSE 100 Index and the German DAX Index jumped by 1.1 percent and 1.3 percent, respectively.

In the bond market, treasuries closed notably lower on the heels of the Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged up 6.4 basis points to 2.092 percent.

Looking Ahead

Trading on Thursday may continue to be impacted by reaction to the Fed statement as well as reports on third quarter GDP, pending home sales, and weekly jobless claims.

On the earnings front, Aetna (AET), Alcatel-Lucent (ALU), Altria (MO), ConocoPhillips (COP), Goodyear (GT), MasterCard (MA), Nokia (NOK), and Sony (SNE) are among the companies due to report their quarterly results before the start of trading on Thursday.