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Market Recap: Feds Unlimited QE3 Sends Markets Soaring

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Markets closed up today:

▲ Dow: +1.55 percent

▲ Nasdaq: +1.33 percent

▲ S&P: +1.63 percent

Precious metals:

▲ Gold: +2.02 percent to $1,766.79 an ounce

▲ Silver: +4.36 percent to settle at $34.65

Commodities:

▲ Oil: +1.30 percent

Market were up because:

The stock market staged a huge rally Thursday after investors got the aggressive economic help they wanted from the Federal Reserve.

The Dow Jones industrial average spiked more than 200 points and cleared 13,500 for the first time since the beginning of the Great Recession. The average is within 625 points of its all-time high.

The Fed said it would spend $40 billion a month, for as long as it takes, to stimulate the economy by buying mortgage securities - and perhaps buy more if the job market doesn't improve.

The central bank also extended its pledge of super-low short-term interest rates into 2015, extended a program to drive down long-term rates and promised to maintain "highly accommodative" policy even after the economy strengthens.

It was the package known as QE3 - a third round of quantitative easing, in market-speak. And it was just what investors were hoping for.

The Dow closed up 206.51 points, the seventh-biggest gain this year, at 13,539.86, its highest close since the last days of December 2007, the first month of the recession.

The broader Standard & Poor's 500 index was up 23.43 points at 1,459.99, also its highest since December 2007. The Nasdaq composite index, which has been trading at its highest levels since 2000, was up 41.52 at 3,155.83.

The stock market had already enjoyed a summer rally, in part because investors were betting on more Fed action. The Dow has climbed more than 1,100 points since the start of June.

Still, stocks spiked Thursday in industries across the economy. Materials companies, which tend to do well when the economy picks up, enjoyed the biggest gain - 2.6 percent as a group. Bank stocks also surged.

This is the third round of bond-buying by the Fed since the financial crisis struck in the fall of 2008. The goal is to lower long-term interest rates, get people to borrow and spend more and push investors into stocks.

Some economists and investors have warned that the bond-buying will have a limited impact because interest rates are already near record lows.

Critics of the stock rally note that the Fed is taking action because the U.S. economy is weak, and that economic growth in China is slowing and much of Europe is in recession and struggling with high debt.

Earlier this month, Mario Draghi, the head of the European Central Bank, said the central bank would buy the debt of countries that use the euro and are desperate to keep their borrowing costs down.

The Fed also lowered its outlook for economic growth this year to no stronger than 2 percent. That's down from its forecast of 2.4 percent in June.

The price of gold climbed to its highest level since February - $1,772 an ounce, a gain of $38, or 2 percent. When the Fed buys bonds, gold often rises, both because investors fear inflation and because a weaker dollar makes gold more expensive.

The trading day didn't begin well. European markets were falling and U.S. futures slid, suggesting stocks might fall when U.S. markets opened.

In addition to worries about what the Fed might do, investors were rattled by turmoil in the Middle East. Protesters stormed the U.S. Embassy compound in Yemen's capital earlier in the day, and there was violence around the U.S. mission in Cairo. The U.S. ambassador to Libya was killed Tuesday.

Stocks rose after the open but barely. Then the Fed released a statement about its moves shortly after 12:30 p.m., and prices began to climb steadily. Some Fed watchers homed in on a pledge to keep stimulating the economy for a "considerable" time "after" it appears to have strengthened. That is stronger language than the central bank had used before.

Then Bernanke started speaking at the press conference at around 2:15, and stocks shot up. A few minutes into the conference, the Dow was up nearly 240 points.

In other news Thursday, the Labor Department reported that the number of people seeking unemployment benefits jumped last week to the highest level in two months, though the figures were skewed in part by Hurricane Isaac.

The Associated Press contributed to this report.

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