Wall Avenue ends increased; Fed ends bond purchases in March

© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, United States on December 8, 2021. REUTERS / Brendan McDermid

By Shreyashi Sanyal and Noel Randewich

(Reuters) – Wall Street ended significantly higher on Wednesday after the Federal Reserve announced it would end its pandemic-era bond purchases in March as it exits guidelines enacted at the beginning of the health crisis.

After its two-day monetary policy meeting, the Fed signaled that its inflation target had been met, and its announcement that it would stop buying bonds paved the way for a three-quarter percentage point hike by the end of 2022.

All three major US stock indices reversed previous losses and climbed into positive territory. Wall Street expanded those gains when Fed Chairman Jerome Powell took on an optimistic tone about the US economic recovery during his press conference and expressed his willingness to raise interest rates as necessary to control inflation.

"Markets are saying that because the Fed is increasing its throttling, they may think inflation is under control," said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta. "They did what was expected. It will add credibility to the Fed and that will – on balance – be neutral to positive for the markets."

Wednesday's sharp rise made up almost all of its losses earlier this week, leaving it just below its record high on Friday.

During the session, the price rose 1.08% to end at 35,927.43 points, while the S&P 500 rose 1.63% to 4,709.85.

That rose by 2.15% to 15,565.58.

The volume on the US stock exchanges was 12.2 billion shares, strongly compared to the average of 11.6 billion in the last 20 trading days.

Inflation and higher interest rates have become a major problem on Wall Street in the past few months. Data from Tuesday showed that producer prices rose faster-than-expected in the twelve months to November, the largest increase since 2010. Last week's consumer price data showed the largest increase in nearly four decades.

"They positioned hedge funds for the worst for the worst for stocks for the Fed's statement," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "Today I think a function is the expectation to sell and the news to buy."

Among the 11 S&P 500 sector indices, the technology sector rose 2.7% and healthcare rose 2.1%.

Apple Inc (NASDAQ 🙂 rose 2.85% and Nvidia (NASDAQ 🙂 Corp rebounded 7.49%, with both upping the S&P 500 more than any other stock.

The Philadelphia Semiconductor Index rose 3.7%.

Albemarle (NYSE 🙂 Corp finished 1.67% lower after Goldman Sachs (NYSE 🙂 downgraded lithium producer from neutral to sell.

Increasing issues outweighed declining issues on the NYSE by a ratio of 1.85 to 1; on the Nasdaq favored a ratio of 1.70 to 1 advanced.

The S&P 500 made 40 new 52-week highs and 10 new lows; the Nasdaq Composite posted 38 new highs and 545 new lows.

(This story is expanded to include the word "prices" in paragraph 3)

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