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Fed keeps buying and so does Wall Street

Wednesday, September 18, 2013 - 02:15

Sept. 18 - Summary: Stocks are propelled to record highs as the Fed surprises by not altering bond buying program, cuts forecast; Housing starts, mortgage demand improves; FedEx, Oracle beat; Pandora wins legal spat. Conway G. Gittens reports.

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The Federal Reserve gives the market a big wet kiss - by not rolling back its $85 billion a month bond buying program - sending the Dow and S&P 500 to record highs. But that wasn't the only surprise. Federal Reserve Chairman Ben Bernanke and his colleagues slashed their economic growth forecasts for this year and next, despite progress in the labor market. SOUNDBITE: FEDERAL RESERVE CHAIRMAN BEN BERNANKE (ENGLISH) SAYING: "Over the past 12 months aggregate hours of work are up about 2.4 percent, weekly new claims for unemployment insurance have fallen by about 50,000 and surveys suggest that households perceive jobs as more readily available. Importantly these gains were achieved despite substantial fiscal headwinds, which are likely slowing economic growth this year by a percentage point or more and reducing employment by hundreds of thousands of jobs." For that reason, the group "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases." Markets had been betting the Fed would trim purchases by at least $10 billion. Stocks swung from modest declines to gains in a matter of seconds after the Fed made its announcement - finishing sharply higher. On the other hand, Yields on the 10-year note touched a more than one-month low. The housing-related sector will surely breathe easier after hitting a speed bump when mortgage rates spiked this spring. New construction on single-family homes jumped to a six-month high in August. Meanwhile, demand for mortgages and refinancings rebounded last week, according to a separate survey from Mortgage Bankers. On the stock front, Priceline.com touched $1,000 a share, the first member of the S&P 500 ever to do so. Corporate results remain spotty: Economic bellwether FedEx beat profit forecast thanks to cost cutting, not improving demand. And business software company Oracle also topped earnings targets but sales were light. Pandora scores a win in the courts that will allow it to keep streaming music from some 470,000 musicians as part of a disputed licensing agreement. The victory was welcomed by shareholders as Pandora now faces new competition from Apple's iTunes Radio. European stocks were little changed ahead of the Fed announcement and upcoming German elections.

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Fed keeps buying and so does Wall Street

Wednesday, September 18, 2013 - 02:15

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