STOCKS EXPLODE TO ALL-TIME HIGHS AFTER FED TAPERS: Here's What You Need To Know

Flickr / Federal ReserveFed Chair Ben Bernanke takes questions after announcing the taper.The Federal Reserve sent shockwaves through the markets by unexpectedly announcing a tapering of its quantitative easing program.

First, the scoreboard:

• Dow: 16,133.1 (+257.8, +1.6%)
  
• S&P 500: 1,807.2 (+26.2, +1.4%)
• Nasdaq: 4,065.1 (+41.4, +1.0%)

And now the top stories:

• The Fed announced today that it would reduce its monthly purchases of $85 billion worth of Treasury and mortgage bonds by $10 billion. Some economists saw this coming, but most economists thought this first tapering announcement would come in January or April.
• It's worth noting that many experts warned that an earlier-than-expected tapering announcement would be bad for stocks. The exact opposite happened.
• However, tapering is not a tightening of monetary policy. The Fed reiterated this point further by clarifying that it would keep interest rates low, even long after the unemployment rate falls under the 6.5% threshold articulated earlier this year. From the FOMC's statement: "The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."
• The Fed also updated its economic projections. They now expect the unemployment rate to fall to between 6.3% to 6.6% in 2014. They also lowered their expectations for inflation while raising their expectations for GDP growth.
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