The markets have been eagerly awaiting the outcome of the Federal Open Market Committee meeting. Investors expected the Federal Reserve would announce a third quantitative easing, and the Fed delivered.
The Fed acknowledged that "growth in employment has been slow, and the unemployment rate remains elevated." The Fed believes that without further stimulus, the economy may not be strong enough for employment conditions to continue to improve, and inflation will remain under its 2% target.
To rectify this situation, the Fed announced it would purchase an additional $40 billion per month of agency mortgage-backed securities. Together with the interest from its already sizable holdings of MBS, the Fed should be able to purchase $85 billion of MBS per month. The Federal Reserve also announced that it expects to extend the exceptionally low levels for the federal funds rate until mid-2015.
The markets as a whole are up, and a few stocks are leading the way.
Today's Dow leaders
Today's Dow leader is Bank of America (NYSE:BAC) up 2.34% ($0.22) to $9.19. The Fed's stimulus announcement has pushed up the banking sector as a whole. The stimulus will be a boon for the big banks, as their performance is highly dependent on the health of the economy. Bank of America was the third-best-performing Dow stock in August. The stock is already up nearly 16% in September and is on the way to being one of this month's top three, as well. Fool analyst John Maxfield recently took an in-depth look at Bank of America. Click here to read his take.
Second behind Bank of America is Disney (NYSE:DIS), up 1.26% ($0.64) to $52.35. Today the stock hit an all-time high of $52.67. Disney is one of several consumer discretionary stocks in the Dow to post some amazing results recently. Last month, the company reported earnings per share this past quarter of $1.01, 31% higher than the prior-year quarter and better than analysts' expectations of $0.93 per share. The great results were driven by The Avengers, which finished the third-highest-grossing movie of all time with $1.5 billion in sales. Already up 40% year to date, Disney looks like a screaming buy to Fool analyst Tim Beyers. Click here for his take.
The best approach
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Dan Dzombak can be found on his Facebook page. He owns shares of Bank of America. Click here and like his Facebook page to follow his investing articles. The Motley Fool owns shares of Bank of America and Walt Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney.The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.