Stocks closed lower Wednesday after the Federal Reserve, as expected, said it is ending its stock-friendly ‘QE’ program. The Dow Jones industrial average fell 31.44 points, or 0.2%, to 16,974.31 and the Standard & Poor’s 500 index dipped 2.75 points, or 0.2%, to 1982.30. The Nasdaq composite index dropped 15.07 points, or 0.3%, to 4549.23.
Quantitative easing, the bond-buying experiment the Federal Reserve hatched during the financial crisis, was phased out by the Fed, which concluded a two-day meeting Wednesday. At the same time, the Fed pledged to keep its benchmark short-term interest rate near zero for a “considerable time” after the bond buying ends.
While the Fed’s statement reiterated that the timing of its first rate hike will depend on how the incoming data on inflation and the labor market come in, it did little to change the view at UBS that the first rate increase won’t occur until mid-2015, says Maury Harris, an economist at UBS. QE started after initial measures by the central bank — pushing the key short-term fed funds rate to zero, which would let businesses and consumers borrow at cheaper rates — did not do enough to revive the economy.
The Fed’s last meeting ended on Sept. 17. The following day the S&P closed at its most recent record high, and the Dow followed suit on the 19th. Currently, the S&P and Dow are each less than 2% below their record closes.