Stocks Welcome a 'True' Taper with a Smile
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After trading flat into the 2PM FOMC statement, stocks surged into the close Wednesday on news the Fed will begin to taper QE. As hedge fund titan David Tepper eloquently stated in the summer, "to keep the markets going up at a steady pace the Fed has to taper back." The markets are seeing the impact of the backwards-thinking wisdom today.
Heading into the close the Dow is up 296, the Nasdaq is up 46 and the S&P 500 is up 30.
In its statement today, the FOMC said it will lower its monthly asset purchases from $85 billion to $75 billion. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.
In its decision to taper, the Fed said economic activity is expanding at a moderate pace, labor market conditions improved, household spending and business fixed investment advanced, fiscal policy is having less of a strain on economic growth, and inflation remains low. One worrying spot was housing, where the Fed said the recovery slowed somewhat in recent months.
While most watchers were expecting the taper to begin shortly, after the Fed's decision to delay a widely-expected move in September, many thought a taper would not come until early next year.
One point that was being made by some into the decision was the fact that it will be Ben Bernanke's second to last meeting as Fed Chairman before Janet Yellen takes over on February 1, 2014. He wanted to start to wind down the monster he created, which is an important gesture to the incoming Chairman.
Even with the taper, the fact remains the Fed is pumping the system with $75 billion in fresh money monthly. This fact is not being lost on the market.
Heading into the close the Dow is up 296, the Nasdaq is up 46 and the S&P 500 is up 30.
In its statement today, the FOMC said it will lower its monthly asset purchases from $85 billion to $75 billion. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.
In its decision to taper, the Fed said economic activity is expanding at a moderate pace, labor market conditions improved, household spending and business fixed investment advanced, fiscal policy is having less of a strain on economic growth, and inflation remains low. One worrying spot was housing, where the Fed said the recovery slowed somewhat in recent months.
While most watchers were expecting the taper to begin shortly, after the Fed's decision to delay a widely-expected move in September, many thought a taper would not come until early next year.
One point that was being made by some into the decision was the fact that it will be Ben Bernanke's second to last meeting as Fed Chairman before Janet Yellen takes over on February 1, 2014. He wanted to start to wind down the monster he created, which is an important gesture to the incoming Chairman.
Even with the taper, the fact remains the Fed is pumping the system with $75 billion in fresh money monthly. This fact is not being lost on the market.
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