U.S. stock ETFs rallied Wednesday and volatility-linked funds sold off after the Federal Reserve surprised markets with an announcement that it will not taper its $85 billion a month worth of bond and mortgage purchases.
SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was up nearly 1% as the Dow jumped more than 100 points. DIA had traded in the red earlier in the session before the Fed announcement.
The Fed news also lit a fire under gold. SPDR Gold Shares (NYSEArca: GLD) soared nearly 3% after the central bank decided not to scale back on quantitative easing for now.
In bonds, iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) climbed 0.6% as yields declined.
By a 9-1 vote, the Fed plans to continue to buy the same amount of Treasuries and mortgages each month, MarketWatch reports.
The central bank pointed to an elevated unemployment rate and said government spending cuts and rising mortgage rates are “restraining economic growth,” according to the report.
In currency markets, PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) declined nearly 1%.
In volatility products, iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) dropped almost 4%.
Fed chief Ben Bernanke was scheduled to hold a press conference Wednesday afternoon.
iPath S&P 500 VIX Short Term Futures ETN
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD and TLT.