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The taper is on! And the market likes it.
The Federal Reserve surprised some experts Wednesday by announcing a modest reduction, or tapering, in its bond buying program. The Dow Jones industrial average jumped more than 150 points after the news came out. The SP 500 and the Nasdaq also moved higher. The yield on the 10-year note rose slightly to 2.90%, up from about 2.88% earlier.
The Fed will reduce its monthly purchases of mortgage-backed securities and U.S. Treasuries to $75 billion per month, down from $85 billion.
Many experts had expected the Fed to delay tapering until after Fed chairman Ben Bernanke’s tenure ends next month.
The Fed has been buying bonds since 2008 and many investors say the liquidity boost has been the main driver of the bull market in stocks since 2009.
But as the economy improves, the Fed has been preparing the market for a gradual reduction in the program, known as quantitative easing. Bernanke sent shock waves through global markets in May when he first raised the prospect of tapering.
In other economic news, the number of new homes breaking ground soared nearly 23% in November from the month prior, the Commerce Department said. But applications for building permits, a leading indicator for new home construction, fell 3% in the month.
Ford breaks down. Ford (Fortune 500) shares plunged nearly 7% after the automaker said it expects profits in North America to be lower next year as it , rolls out new models in the United States. General Motors (Fortune 500) and , Tesla ( shares were also lower. )
At least one trader was surprised to see electric car maker Tesla following its mostly gas-powered rivals lower.
Other traders argue that the selling, which pushed Ford shares below $16 for the first time since August, was overdone.
The retreat is a buying opportunity just in time for the holidays, according to another trader.
Not everyone is buying it, though. Some traders are bracing for more downside in Ford stock.
What’s moving. Gogo ( shares sank after the lock-up period for certain holders of the stock expired. Company insiders and underwriters were prohibited from selling shares for 180 days after the in-flight Internet provider went public on June 20. )
Shares of movie theater chain AMC ( rose nearly 9% after the company raised $331 million from its )initial public offering late Tuesday.
General Mills (Fortune 500) shares were slightly lower after reporting earnings that missed forecasts, and , FedEx (Fortune 500) shares also dipped after delivering an earnings update. , Oracle (Fortune 500) is set to report results after the market close. ,
Shares of social media companies were under pressure. LinkedIn ( was hit particularly hard, while )Facebook (Fortune 500) and , Twitter ( suffered more minor losses. The )Global X social media index (, which tracks a basket of social media companies, was down more than 1%. There was no obvious reason for the pullback, but social media stocks have had a strong year. The ETF is up more than 50% since January. )