U.S. stocks rose on Wednesday, with the Dow Jones Industrial Average hitting its first record close of the year, as Wall Street welcomed a further reduction in the Federal Reserve's monthly bond purchases while looking past data showing the economy slowed more than expected in the first quarter.
"Who would imagine we would get a first-quarter GDP print so disappointing and yet we're closing the stock market at a high. That shows investors are absolutely looking past the first quarter, and looking to the Fed to continue with lower rates," said Chris Gaffney, senior market strategist at Everbank..
In its statement, the central bank said the economy has gained traction recently after a sharp slowdown. It trimmed its monthly asset purchases to $45 billion, making its fourth consecutive $10 billion cut.
"The Fed has given investors what they were expecting, and investors like that stability," said Gaffney.
Equities had fluctuated ahead of the Fed move while weighing reports that had growth stalling in the first quarter and employers adding more workers than projected to their payrolls in April.
The government's estimate that the U.S. economy grew 0.1 percent in the first quarter, versus a 1.2 percent estimate, drew a muted reaction from stock futures ahead of Wall Street's open.
"GDP was a bit of a shock, there is no doubt about that, but that fact that nobody is talking about recession and futures are flat tells you all you need to know. The economy was impacted by the weather and will likely improve as the year progresses," said Dan Greenhaus, chief market strategist at BTIG.
The much weaker-than-expected GDP "gives the Fed a whole lot more leeway to keep doing what they're doing. They've said they intend to keep rates near zero until 2015, and if you look at today's GDP report, you start to believe it," said Bruce Bittles, chief investment strategist at RW Baird & Co..