Investing.com - A Federal Reserve decision to trim its monthly bond-buying program by $10 billion on assumptions that the economy is gaining steam offset a dismal first-quarter growth report and sent stocks rising on Wednesday.
At the close of U.S. trading, the Dow 30 rose 0.28%, the S&P 500 index rose 0.30%, while the NASDAQ Composite index rose 0.27%.
The Fed said earlier it was leaving interest rates unchanged at 0.00%-0.25% though it did cut its monthly bond-buying program to $45 billion from $55 billion, citing economy recovery that should gain steam as it brushes off the fallout from rough winter weather.
While Fed asset purchases support stocks by suppressing long-term borrowing costs, Wall Street applauded the news as a sign monetary authorities view economic fundamentals as improving.
Still, once the Fed does conclude the stimulus program, benchmark interest rates should remain at rock-bottom levels for a while, which would be bullish for stocks over the long term.
"The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored," the Fed statement read.
"The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."
Elsewhere, the Bureau of Economic Analysis reported earlier that U.S. gross domestic product grew at an annual rate of 0.1% in the first quarter, far shy of expectations for a 1.2% growth rate, though rough winter weather played a factor. The U.S. economy expanded by 2.6% in the previous quarter.
Separately, payroll processing firm ADP said non-farm private employment rose by 220,000 this month, above expectations for an increase of 210,000. March’s figure was revised up to a gain of 209,000 from a previously reported increase of 191,000.
Data also showed that the Chicago purchasing managers’ index rose to 63.0 this month from a reading of 55.9 in March. Analysts had expected the index to improve to 56.7 in April.
The indicators offset disappointing data in earnings released by Twitter Inc (NYSE:TWTR) and eBay Inc (NASDAQ:EBAY).
Leading Dow Jones Industrial Average performers included 3M Company (NYSE:MMM), up 1.09%, Goldman Sachs Group Inc (NYSE:GS), up 0.98%, and Walt Disney Company (NYSE:DIS), up 0.83%.
The Dow Jones Industrial Average's worst performers included Pfizer Inc (NYSE:PFE), down 1.53%, American Express Company (NYSE:AXP), down 0.39%, and Chevron Corporation (NYSE:CVX), down 0.37%.
European indices, meanwhile, finished mixed.
After the close of European trade, the DJ Euro Stoxx 50 fell 0.37%, France's CAC 40 fell 0.23%, while Germany's DAX rose 0.20%. Meanwhile, in the U.K. the FTSE 100 rose 0.15%.
On Thursday, the U.S. is to publish the weekly report on initial jobless claims. At the same time, Fed Chair Janet Yellen is to speak at an event in Washington; her comments will be closely watched.
Later Thursday, the Institute of Supply Management is to release a report on manufacturing activity.