Another day of record highs for stocks

Gains come after Fed announced aid cuts

Stock indexes on Wall Street shrugged off a downbeat start and notched more record highs Wednesday after the Federal Reserve announced plans to begin reducing the extraordinary aid for the economy it has been providing since the early days of the pandemic.

The S&P 500 rose 0.6 percent and the Dow Jones Industrial Average added

0.3 percent, both marking their fifth straight gain. The Nasdaq climbed 1 percent, extending its winning streak to an eighth day. All three indexes set their latest record closing highs a day earlier.

In a statement, the Fed said it will begin reducing its $120 billion in monthly bond purchases in the coming weeks by $15 billion a month. If that pace is maintained, the Fed could be done winding down its bond purchases as early as June. At that point, the Fed could decide to begin raising its key short-term interest rate, which affects many consumer and business loans.

The central bank reserved the right to change the rate at which it reduces the bond purchases, which have been intended to hold down longterm rates and spur borrowing and spending.

The Fed’s announcement was in line with what economists and markets expected as the central bank moves to combat inflation that now looks likely to persist longer than it did just a few months ago.

“Much of the bond tapering announcement was already priced into markets and shouldn’t have come as a surprise to anyone that was paying attention to what the Fed has been indicating for most of this year,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

The S&P 500 rose 29.92 points to 4,660.57. The Dow gained 104.95 points to 36,157.58. The Nasdaq added 161.98 points to 15,811.58.

The Fed’s latest statement and policy shift comes amid persistent rising inflation that has cut into corporate operations and raised prices on raw materials. It is also making finished goods more expensive, raising concerns about whether consumers will cut back on spending as prices rise.

At a news conference Wednesday, Fed Chair Jerome Powell stressed that the outlook for inflation looks highly uncertain, limiting the ability of the Fed to tailor its policies in response.

The central bank and investors have also been closely monitoring the recovery in the employment market, which has been lagging the broader economic recovery.