Stocks rise sharply as Fed says no change in stimulus

stocks

JeeYeon Park
CNBC

1 minutes ago

Stocks spiked higher on Wednesday, with the Dow and S&P 500 both surging to a fresh highs, after the Federal Reserve kept its bond-buying program intact.

(Read more: How today's Fed statement compares to previous one)

The Dow Jones Industrial Average shot up more than 130 points to hit a fresh high of 15,664.82, and was 117 points ahead in afternoon trading.

The S&P 500 also hit a new high of 1,723.33. The Nasdaq also rallied sharply following the announcement. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell near 13.

All key S&P sectors turned higher, propelled by materials and utilities.

The Federal Reserve said it would continue buying bonds at the current rate of $85-billion a month for now, surprising Wall Street. Strategists and traders were expecting the central bank to announce a $10-$15 billion reduction to its asset purchase program.

"The committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases," the U.S. central bank said in a statement announcing its decision.

(Read more: Taper: What Wall Street's favorite buzzword means)

Chairman Ben Bernanke was slated to hold a press conference where he was expected to outline the Fed's forecasts for 2016 for the first time. His speech will also be combed for any hints of who might be named as his successor. Vice Chair Janet Yellen is considered the forerunner, since former Treasury Secretary Larry Summers withdrew his bid over the weekend. (CNBC.com will be streaming the press conference live.)

Treasury yields slid, with the Benchmark 10-year yield at 2.76 percent, down from 2.86 before the Fed statement.

Homebuilders rallied sharply following the announcement. KBHome and Ryland Group surged more than 5 percent each.

Apple climbed as first reviews of the new iPhones released overnight showed mostly positive reactions for the 5C and 5S. In addition, the tech giant's redesigned iOS 7 mobile-operating system will be available Wednesday as an upgrade for older iPhones and iPads.

(Read more: Apple's silence on iPhone 5C pre-orders)

BlackBerry ticked higher after the smartphone maker unveiled its new Z30 phone, in an effort to compete with the likes of Apple's new iPhone 5S and Samsung's Galaxy S4.

Meanwhile, President Obama said Washington is stuck in a stalemate over budgets, debt and healthcare costs, leaving government unable to function properly, speaking at a gathering of CEOs.

On the economic front, housing starts rose less than expected, increasing 0.9 percent to a seasonally adjusted annual rate of 891,000 units in August, according to the Commerce Department. July's starts were revised down to show a 883,000-unit pace instead of the previously reported 896,000 units. Economists polled by Reuters expected a reading of 917,000 units.

The Mortgage Bankers Association said home loan applications rose 11.2 percent, after slumping 13.5 percent last week.

(Read more:Curious to see how the 'new' Dow would be performing?)

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