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US close: Stocks rocket on QE3 announcement

Date: Thursday 13 Sep 2012

US close: Stocks rocket on QE3 announcement

US stocks soared on Thursday after the US Federal Reserve announced that it will launch its third round of quantitative easing, or QE3, by purchasing mortgage-backed securities ‘to support a stronger economic recovery’.

The Fed announced that, in order to bolster the economy and make sure that inflation stays close to its target, it would step up “policy accommodation” by buying more mortgage-backed securities at a pace of $40bn per month.

The announcement prompted the Dow Jones Industrial Average to rise by 206.51 points to its highest level since late 2007, and the S&P 500 by 23.43 points to its highest closing point since December of the same year.

The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting this Friday.

It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities.

As expected, there was no change to the Fed's low interest rates policy.

Jobless claims and inflation figures on the up

Initial jobless claims rose 15,000 to a seasonally adjusted 382,000 last week, according to the Labor Department. The consensus estimate was for a smaller rise to 370,000.

“We do not interpret the higher-than-expected outturn in claims as a sign that labor market conditions are weakening since the Labor Department reported that claims were pushed higher partially as a result of Tropical Storm Isaac and the seasonal distortions associated with a shortened holiday work week,” said analyst Michael Gapen from Barclays Research.

Meanwhile, the producer price index rose 1.7% in August, the biggest rise in over three years and ahead of the 1.2% increase that was expected, as gasoline and food prices gained more than forecast.

Apple extends gains after iPhone 5 release

Tech giant Apple closed at a record high of $682.98 after unveiling its newest toy, the iPhone 5. With a four-inch 1136x640 pixel screen, the iPhone 5 is 18% thinner and 20% lighter than the previous iPhone 4S, but lacks near field communications and wireless charging technology available in smartphone offerings from rival companies.

Analysts at Barclays Capital have raised their price target for the stock to $810 from $750 today.

Computer chip titan Intel slipped after Citigroup downgraded its recommendation from ‘buy’ to ‘neutral’, while sports apparel group Nike was lower after the same US broker also cut its rating.

Purification solutions provider Pall cheered the market with fiscal fourth quarter earnings that were well ahead of expectations at 86 cents per share. Analysts had been expecting a figure around 77 cents.

Other markets

10-year US Treasuries were little changed after the Fed's big decision, with the yield at 1.73%.

The front month contract for West Texas intermediate crude was up $1.30 at $98.31 a barrel at the close of trading.


S&P 500 - Risers
Alpha Natural Res (ANR) $8.23 +12.13%
Pall Corp. (PLL) $62.80 +7.96%
CBRE Group Inc (CBG) $19.60 +6.81%
Cliffs Natural Resources Inc. (CLF) $43.18 +6.30%
Newmont Mining Corp. (NEM) $55.45 +5.50%
Monster Beverage Corp (MNST) $53.41 +5.18%
Bank of America Corp. (BAC) $9.40 +4.79%
Titanium Metals Corp. (TIE) $13.45 +4.75%
Citigroup Inc. (C) $34.45 +4.24%
Freeport-McMoRan Copper & Gold Inc. (FCX) $41.79 +4.21%

S&P 500 - Fallers
O'Reilly Automotive Inc. (ORLY) $81.53 -4.80%
NRG Energy Inc. (NRG) $21.80 -2.42%
Sears Holdings Corp. (SHLD) $59.82 -1.77%
Tenet Healthcare Corp. (THC) $5.37 -1.65%
Nike Inc. (NKE) $99.20 -1.63%
Best Buy Co. Inc. (BBY) $18.32 -1.40%
Northrop Grumman Corp. (NOC) $67.01 -1.35%
J.C. Penney Co. Inc. (JCP) $28.66 -1.34%
Frontier Communications Co. (FTR) $4.78 -1.34%
Airgas Inc. (ARG) $81.95 -1.28%

Dow Jones I.A - Risers
Bank of America Corp. (BAC) $9.40 +4.79%
JP Morgan Chase & Co. (JPM) $41.40 +3.71%
American Express Co. (AXP) $59.05 +3.11%
Alcoa Inc. (AA) $9.63 +2.99%
Home Depot Inc. (HD) $58.30 +2.19%
United Technologies Corp. (UTX) $80.53 +2.16%
Coca-Cola Co. (KO) $38.35 +2.13%
Exxon Mobil Corp. (XOM) $91.23 +1.88%
Chevron Corp. (CVX) $116.56 +1.82%
E.I. du Pont de Nemours and Co. (DD) $51.13 +1.79%

Nasdaq 100 - Risers
Monster Beverage Corp (MNST) $53.41 +5.18%
Staples Inc. (SPLS) $11.96 +3.64%
F5 Networks Inc. (FFIV) $100.39 +3.53%
Randgold Resources Ltd. Ads (GOLD) $114.35 +3.40%
Nuance Communications Inc. (NUAN) $25.61 +3.02%
Viacom Inc. Class B (VIAB) $52.26 +2.85%
Cognizant Technology Solutions Corp. (CTSH) $70.04 +2.71%
Infosys Technologies Ltd. (INFY) $47.33 +2.67%
Cerner Corp. (CERN) $73.24 +2.58%
Baidu Inc. (BIDU) $109.83 +2.56%

Nasdaq 100 - Fallers
O'Reilly Automotive Inc. (ORLY) $81.53 -4.80%
Sears Holdings Corp. (SHLD) $59.82 -1.77%
Marvell Technology Group Ltd. (MRVL) $10.19 -0.54%
Avago Technologies Ltd. (AVGO) $35.07 -0.45%
CH Robinson Worldwide Inc (CHRW) $57.24 -0.37%
Xilinx Inc. (XLNX) $34.87 -0.24%
Dell Inc. (DELL) $10.63 -0.09%
Fossil Inc. (FOSL) $84.00 -0.07%
KLA-Tencor Corp. (KLAC) $51.48 -0.02%

NR

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