USD fall vs rivals after Fed announces fresh round of asset purchases to kickstart economy. USD dropped sharply in extremely volatile trading in initial reaction but soon recovered most of the loss. Investors expected roughly $500 billion in Treasury purchases over 5-6 months, notes Vassili Serebriakov, FX strategist at Wells Fargo in New York, but
Fed announced $600 billion package over 8 months. Late Wednesday, EUR/USD was at 1.4122, vs 1.4034 late Tuesday, USD/JPY 81.13 vs 80.64, EUR/JPY 114.59 vs 113.19, GBP/CHF $1.6095 vs $1.6028, USD/CHF 0.9707 vs 0.9795. U.S. Dollar Index was 76.396 vs 76.731.
DJIA made 2-year closing high after violent bouncing following congressional election, QE2.
BlackRock down 4.3%, after Bank of America said offering at least 34.5 million shares it holds in it, while fellow part-owner PNC Financial Services selling up to 7.5 million shares. PNC +2.2%, BoA +1.1%. KKR +0.4% even as 3Q earnings dropped 61% after its private-equity portfolio appreciated less than in year-earlier. Dow +0.2%, Nasdaq +0.3%, Philly Semicons +1.0%. 30-year Treasury bond tumbled, erasing earlier gains, as it wasn''t favored in U.S. Fed''s debt buying program, while 10-year also reversed gains.
Oil prices hit fresh 6-month high as Fed''s widely anticipated QE followed bigger-than-expected decline in U.S. fuel inventories;
December Nymex settled up 0.9% at $84.69/bbl. Gold prices whipsawed in after-market trade as investors were skittish after FOMC announcement.
However, December Comex gold closed down 1.4% at $1337.60/oz. (lucy.craymer@dowjones.com)
US Stocks End Volatile Session Higher; DJIA At 2-Yr High Close;
By JONATHAN CHENG
The Dow Jones Industrial Average lurched to a two-year closing high, bouncing around violently after the congressional election and after the
Federal Reserve said it would buy $600 billion to prime the domestic economy.
The Dow gained 26.41 points, or 0.24%, to finish at 11215.13 after a volatile afternoon, while the Standard & Poor's 500-stock index added 4.39 points, or 0.37%, to close at 1197.96 and the Nasdaq Composite edged up 6.75 points, or 0.27%, to 2540.27.
The 10-year Treasury note sank, pushing the yield up to 2.625%.
Gold and copper also fell as the Fed said it would maintain its existing policy of reinvesting principal payments from its securities holdings, and purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011 at a pace of about $75 billion a month.
The Fed said it would also "regularly review the pace of its securities purchases and the overall size of the asset-purchase program" as economic data flow in.
Expectations of Fed easing had helped fuel a two-month surge on the stock market that has added 12% to the Dow.
The Fed move was generally in line with market estimates, putting to rest the idea that the central bank would proceed on a more cautious step-by-step basis from the get-go.
Anthony Chan, chief economist at J.P. Morgan Private Wealth Management, said that tepid approach was now "off the table." Chan said the Fed's approach would help with "taking the uncertainty out of the air."
Keith Springer, president of Capital Financial Advisory Services, said the Fed delivered "the bare minimum" of what the market would accept, but warned that there was a gloomy message in the size of its package. "Things must be pretty bad out there for the Fed to be this worried," he said.
Dan Cook, chief executive of IG Markets-U.S. in Chicago, said the move was "right in line" with market expectations, leading to some of the initial market confusion. "I had expected more of a pop, but it was just so close to what was expected," he said. "This might be a thing where we have a battle that goes on for a bit before they pick a direction."
Scott Clemons, chief investment strategist for Brown Brothers Harriman, said the
Fed's push to further ease monetary conditions would likely maintain downward pressure on the dollar. "I think it's actually an explicit desire of the Fed--it makes our export markets more attractive, and it makes imports more expensive, which helps to import inflation, and the Fed has said very clearly they would like to see some inflation," Clemons said.
The market moves came on a day when the economy showed tepid signs of improvement. Private-sector employment grew by 43,000 in October, topping consensus estimates of a 22,000-job gain. U.S. factory orders rose by a higher-than-expected 2.1% in September, the third consecutive month of growth for one of the economy's key drivers. Meanwhile, a measure of non-manufacturing activity came in at 54.3 for October, higher than September's 53.2 reading and better than consensus expectations of 53.5.
After the Fed's intervention, "I think if the data continues to be marginally positive, which it's been over the last couple weeks, there could be some fuel to the fire" to keep the rally in stocks going, said Frank Longman, market technician at Brean Murray, Carret & Co.
Companies in focus include BlackRock, which tumbled 4.3% after Bank of America said it is offering at least 34.5 million shares it holds in the money manager, while fellow part-owner PNC Financial Services Group is selling up to 7.5 million shares. Bank of America may also sell another 6.3 million shares in the overallotment option. PNC gained 2.2%, while Bank of America added 1.1%.
KKR gained 0.4% even as third-quarter earnings dropped 61% after its private-equity portfolio appreciated less than in the year-earlier period, thus hurting its revenue.
Some auto makers fared well after reporting significant jumps in new-vehicle sales amid stronger buying by American consumers. Ford Motor gained 5.2% after reporting a sales increase of 19% in October from the year before. Honda Motor gained 0.4% after reporting gains of 16%.
Garmin slumped 5.3% after a 30% increase in earnings at the maker of digital navigation devices missed analysts' expectations and came amid weaker sales and margins.
PulteGroup lost 7.7% after the Michigan home developer's third-quarter loss widened to nearly $1 billion. Pulte said orders dropped 12% from a year earlier and 15% from the second quarter.
Hartford Financial Services Group jumped 9.2% after the insurer beat third-quarter earnings expectations and raised its 2010 profit estimate.
MGM Resorts International surged 10% as the company's third-quarter loss narrowed amid sharply lower write-downs related to its struggling Las Vegas City Center complex.
Time Warner shed 1.1% after its earnings fell 21%, as the media giant took a hit related to debt redemptions, though adjusted earnings and revenue rose. AOL, which was spun off from the media giant last year, rose 3.2% after asset sales helped the Internet company boost profits.
Aetna gained 2.9% after earnings rose 53% as investment gains and lower medical costs offset continued declines in employer-based membership. Wellpoint, however, dropped 0.5% after third-quarter profit rose 1.2% following prior-year write-downs as claims costs rose, contrasting with a trend seen in much of the health-insurance industry this year.
U.S.-traded shares of French bank Societe Generale gained 3.7% after the lender said its third-quarter net profit doubled due to lower bad-loan provisions and growth in international retail banking.
Stocks in Europe stuck largely to the sidelines ahead of the Fed decision, with the Stoxx 600 index finishing down 0.4%. In Asia, Hong Kong's Hang Seng index broke above 24000 to trade at its highest level since mid-2008, led by banks.
Gold tumbled to below $1340 an ounce, while oil jumped to its highest settle in six months.
(Donna Kardos Yesalavich, Steve Russolillo and Kristina Peterson contributed to this article.)
--By Jonathan Cheng, The Wall Street Journal; Jonathan.Cheng@wsj.com
