The Dow, the S&P 500 and the Nasdaq closed at record highs for the third straight day Wednesday after the Federal Reserve said that later this month it would begin slowing the pace of its $120 billion in monthly bond purchases.
The Dow Jones Industrial Average finished up 104 points, or 0.29%, to 36,157. The S&P 500 gained 0.65% and the Nasdaq, which hit an intraday high, advanced 1.04%.
The Fed will taper $15 billion from the monthly pace, with reductions in Treasury bond purchases of $10 billion and a further $5 billion cutback in purchases of mortgage-backed securities.
Changes in the economic outlook, however, will give the Fed the power to "adjust the pace of purchases if warranted," the central bank said.
"It’s been pretty clear that tapering was imminent, and though it was widely communicated, it marks the beginning of the end for the Fed’s highly accommodative stance," said Mike Loewengart, managing director for investment strategy at E-Trade Financial.
"What some may be questioning is the Fed is pretty much sticking to their knitting when it comes to their transitory view of inflation, as many feel higher prices are here to stay."
However, Loewengart said, "the supply chain disruptions are a central culprit, an issue which likely won’t last forever."
"So perhaps we need to adjust our view of what transitory really means in terms of duration," he said.
Jamie Cox, managing partner for Harris Financial Group, said “markets were prepared for a far more aggressive taper than what was ultimately delivered -- the Fed has zero intentions of draining liquidity too quickly and derailing the recovery.”
In company news, Bed, Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report rocketed after the home retailer -- and one-time meme stock -- unveiled a distribution partnership with Kroger Co. (KR) - Get Kroger Co. Report and said it would complete its $1 billion share repurchase program by the end of its fiscal year.
Lyft (LYFT) - Get Lyft, Inc. Class A Report finished higher after the ride-sharing company reported third-quarter earnings that handily beat analysts’ forecasts and said it was seeing a post-pandemic return of passengers and drivers to the roads.
Zillow Group (ZG) - Get Zillow Group, Inc. Class A Report slumped after the home buying website shut down its house-flipping business, said it would cut a quarter of its staff and posted a wider-than-expected third-quarter loss.
Activision Blizzard (ATVI) - Get Activision Blizzard, Inc. Report ended lower after the videogame maker delayed the release of two key titles, while forecasting softer-than-expected holiday quarter sales. The company is trying to move past allegations of workplace harassment and broader issues of sexism in the gaming industry.