Stocks increased across the board on Wednesday after the Federal Reserve said it would maintain record low interest rates until at least late 2014.  The Dow Jones Industrial Index (NYSEARCA:DIA), S&P 500 (NYSEARCA:SPY) and Nasdaq (NASDAQ:QQQ) all closed the day higher.  Furthermore, the three major markets are nearing new multi-year highs.

While Fed officials have chosen not to continue additional quantitative easing at this time, they did not rule out the possibility of another bond buying program in the future, saying they were prepared to adjust their “holdings as appropriate to promote a stronger economic recovery in the context of price stability.”  Pledging to maintain interest rates at record lows and keeping more quantitative easing on the table created a turnaround in the equity markets.

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Although the Dow traded as low as 12,580.20 before the Fed statement, the index closed 179 points higher at 12,758.85.  Blue-chip members such as Alcoa Inc. (NYSE:AA), Caterpillar, Inc. (NYSE:CAT), DuPont (NYSE:DD), Chevron (NYSE:CVX) and Bank of America (NYSE:BAC) led the charge higher.  As the weekly chart below shows, the Dow is now within shooting distance of its all-time high.  On October 9, 2007 the Dow closed at 14,164.53.  However, earnings season is still playing out and the Dow has technical resistance at 13,000.

The S&P 500 and Nasdaq also bounced off their daily lows after the Fed statement.  The S&P 500 closed .87 percent higher on the day at 1,326.06, while the Nasdaq closed 1.14 percent higher to close at 2,818.31.  In addition to Fed policy, both indexes were also assisted by the strong earnings reported by Apple Inc. (NASDAQ:AAPL).  “It’s a great company; they are executing. To be that big and continue to grow that much is just an amazing, amazing thing and they don’t seem to be slowing down,” said Joe Saluzzi, co-manager of trading at Themis Trading.

“The Fed is saying that money will stay easy and the cost of money will stay low,” Madelynn Matlock, who helps oversee about $14.5 billion at Huntington Asset Advisors in Cincinnati, said. “The ability for businesses to find the money they need to grow and for consumers to find the money they need to buy things is going to be easier. That makes the growth path a little simpler. On the earnings front, we’ve had fewer positive surprises. That doesn’t mean the overall earnings outlook is worse.”

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Currently, the S&P 500 remains 240 points below its all-time closing high of $1,565.15 made in October 2007.  Meanwhile, the Nasdaq is just 55 points off new multi-year highs made in April 2011 of 2,873.54.  Of the 108 S&P 500 companies that reported results since January 9, 2012, 72 posted per-share earnings that beat projections, according to data compiled by Bloomberg. Bloomberg goes on to report, “Earnings probably grew 3.4 percent for S&P 500 companies in the fourth quarter, the data shows. The projection has fallen from 6.2 percent at the end of last year.”

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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