Wall Street Rallies Big on Announcement of...the Taper?

Michael Teague |

It was the day investors and pundits had been expecting and dreading for the greater part of the year; the Federal Reserve finally announced the first phase of its drawdown of its $85 billion in monthly asset purchases.

The move was somewhat unexpected, as the bulk of pundits and analysts had generally seemed to expect the $10 billion monthly reduction to Quantitative Easing to begin sometime in the first half of 2014. Still, investors have been getting edgy about a slew of positive economic data that has been coming out over the last two weeks, up until this morning even with the news that  housing starts surged 23 percent in the month of November.

Fed Chairman Ben Bernanke dropped the bombshell on Wall Street promptly after the conclusion of Wednesday’s Federal Open Market Committee meeting. It was his last such press conference as the head of the Central Bank after having helped steer the US economy through one of its most difficult periods in recent history.

The sharp and sudden rally for equities that followed this momentous announcement may have been spectacular, but as George Brooks argued on this site earlier in the morning, the free-for-all that followed the news was somewhat to be expected, even as the S&P 500 and the Dow Industrials reached new all-time highs.

The Standard & Poor’s 500 index was up 1.66 percent to 1,810.65, while the Dow Jones Industrials were 1.84 percent higher to 16,167.97, and the NASDAQ added 1.15 percent to 4,070.06 points by the closing bell.

Despite the rally, there was one Dow company that did end the day in the red. Aerospace/defence giant Boeing (BA) was about one-third of a percent lower as the company continues to deal with a growing labor dispute. The index’s biggest gainers were conglomerate 3M Co. (MMM) , up over 3 percent, followed closely by ExxonMobil (XOM) on a gain of 2.9 percent.

The S&P 500 saw notable performances, though a few companies struggled greatly. Chip-maker Jabil Circuit (JBL) ended the day over 20 percent lower after the company released a disappointing earnings statement and announced the sale of its aftermarket services business. Ford (F) was also down 6 percent after saying that it expects slower revenue and earnings growth for their fiscal 2014.

The post-Fed rally along with great housing starts news propelled a number of companies tied to the housing market to the largest percentage increases of the day, with DR Horton Inc. (DHI) , Lennar Corp. (LEN) , and Quanta Services Inc. (PWR) all up over 5 percent.

On the NASDAQ, Ariad Pharmaceuticals (ARIA) continued its steep upward climb, adding almost another 20 percent. Meanwhile, property/casualty insurer Tower Group Financial (TWGP) collapsed, off over 30 percent after revealing that it would be adding over $100 million in loss reserves.

Big oil rallied today as well, with Royal Dutch Shell ($RDS.B) up 1.75 percent, despite the incident last week during which activists in Berlin interrupted one of the company’s “Science Slam” events.

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Symbol Name Price Change % Volume
ARIA ARIAD Pharmaceuticals Inc. 9.34 -0.03 -0.32 7,574,434
BA Boeing Company (The) 139.02 1.57 1.14 5,209,103
DHI D.R. Horton Inc. 28.81 -0.48 -1.64 3,804,621
F Ford Motor Company 11.85 -0.19 -1.58 42,485,988
JBL Jabil Circuit Inc. 21.78 -0.07 -0.32 1,057,891
KGDEF Kingdee International Software Group Co Ltd 0.40 0.00 0.00 0
LEN Lennar Corporation Class A 41.21 -0.53 -1.27 2,789,439
MMM 3M Company 166.23 -5.04 -2.94 3,826,166
PWR Quanta Services Inc. 28.41 -0.08 -0.28 2,596,750
RDSB Royal Dutch Shell ADR B n/a n/a n/a 0
XOM Exxon Mobil Corporation 86.72 -0.19 -0.22 6,835,888


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