U.S. stocks trim gains stemming from Fed move, Dow slides 0.02%

Investing.com - U.S. stocks pared gains made earlier on news that the Federal Reserve will ramp up its quantitative easing program by USD45 billion a month.

Fears monetary policy can't steer the country away from the fiscal cliff spurred profit taking later in the session.

At the close of U.S. trading, the Dow Jones Industrial Average lost 0.02%, the S&P 500 index was down 0.04%, while the Nasdaq Composite index slide 0.28%.

Earlier Monday, the Federal Reserve concluded a December monetary policy meeting by announcing plans to double a stimulus program.

Prior to Wednesday, the Fed had been running a quantitative easing program under which the U.S. central bank bought USD40 billion in mortgage-backed securities a month from banks on an open-ended basis to spur recovery.

To pick up the pace of recovery, the Fed decided to purchase an additional USD45 billion in Treasury holdings, the U.S. central bank announced Wednesday.

Quantitative easing sends stocks rising by design to encourage investing and hiring by keeping borrowing costs low.

The additional Treasury purchases will take the place of the Fed's so-called Operation Twist program, under which the Fed swapped USD45 billion a month in short-term Treasuries for long-termer U.S. government debt.

Benchmark interest rates remained unchanged at a target 0.25%, and the Fed stressed rates will stay that way until unemployment rates approach 6.5% from today's current rate of 7.7% and as long as inflation rates remain close to a 2% target.

"The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored," the Fed said in a statement.

Profit-taking kicked in as investors, many of whom had already priced in the Fed's move, began to shift their focus to the fiscal cliff, a combination of tax hikes and deep spending cuts due to take effect at the end of this year.

The Democratically controlled White House and Congressional Republicans are negotiating fiscal reforms needed to steer the country away from the cliff and a likely recession that careening over the side would cause, and despite whispers of progress, a deal appeared still far off on Wednesday.

Leading Dow Jones Industrial Average performers included Hewlett-Packard, up 1.89%, DuPont, up 1.40%, and General Electric, up 1.26%.

The Dow Jones Industrial Average's worst performers included Wal-Mart, down 2.75%, IBM, down 0.64%, and 3M, down 0.60%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.24%, France's CAC 40 rose 0.01%, while Germany's DAX 30 finished up 0.33%. Meanwhile, in the U.K. the FTSE 100 rose 0.35%.     

In the U.S. on Thursday, markets will focus on retail sales, a leading indicator of consumer spending, as well as data on producer price inflation and the weekly government report on initial jobless claims.