GLOBAL MARKETS-Stocks soar, dollar, bonds fall after Fed decision
* Wall Street hits new highs as Fed keeps stimulus intact
* Fed decision not to taper bond buying surprises market
* Bond yields drop as Fed maintains purchases, dollar drops
NEW YORK, Sept 18 (Reuters) - U.S. stocks jumped while the dollar and bond prices fell sharply on Wednesday after the Federal Reserve put off trimming its stimulus to the economy, saying the tightening of financial conditions could slow the pace of economic improvement. The benchmark S&P 500 stock index surged to a record high and the dollar fell to a seven-month low against the euro after the Fed released its widely anticipated statement at 2 p.m. EDT (1800 GMT). The dollar fell 1 percent against the yen. "The initial reaction was positive, with people thinking, 'Here we go, more liquidity in the market.' That's a good thing as far as being an ongoing tailwind," said David Joy, chief market strategist at Ameriprise Financial in Boston, where he helps oversee $703 billion in assets under management. "But the decision also means the economy isn't as strong as we'd like, which has implications for corporate earnings down the road. I don't think we'll settle up where we popped." In its statement, the Fed said it would await evidence of a more stable economy before adjusting the pace of its purchases. The market was widely expecting the Fed to reduce its $85-billion-per-month asset-buying scheme by at least $10 billion. The Fed also downgraded its forecasts for the U.S. economy. It now sees growth in a 2 percent to 2.3 percent range this year, down from 2.3 percent to 2.6 percent in its June estimates. The downgrade for next year was even sharper.
The Dow Jones industrial average was up 115.28 points, or 0.74 percent, at 15,645.01. The Standard & Poor's 500 Index was up 15.60 points, or 0.92 percent, at 1,720.36. The Nasdaq Composite Index was up 25.59 points, or 0.68 percent, at 3,771.29. The dollar index fell as low as 80.376, the lowest since Feb. 20. It was last at 80.481, down 0.8 percent. The euro, meanwhile, climbed to a seven-month peak of $1.3486. It last changed hands at $1.3469, up 0.8 percent. Against the yen, the dollar fell to 97.98 yen, a three-week low and by mid-afternoon trading, it was down 0.8 percent at 98.35. Benchmark 10-year notes were last up 27/32 in price to yield 2.75 percent, down from 2.86 percent before the statement.