NEW YORK - The stock market bounced to its highest close since May on Wednesday after the Federal Reserve pledged to keep interest rates near zero for almost three more years.
Bond yields dropped sharply, then climbed back later in the day when investors began looking more closely into the Fed's deliberations. The yield on the five-year Treasury note touched an all-time low.
The Fed cut rates to near zero in December 2008, during the financial crisis, and has held them there ever since. The announcement was a sign that the Fed expects the economy, which is improving, to need significant help for three more years.
Anthony Chan, chief economist with JPMorgan Private Wealth Management, called the Fed's move insurance against the European debt crisis and a recession across the Atlantic Ocean. Stock buyers, he said, were happy about the prospect of low inflation and a Fed leaning toward promoting economic growth.
The Dow Jones Industrial Average closed up 83.10 points, or 0.7 percent, at 12,758.85. That's the highest close since May. The Standard & Poor's 500 index rose 11.41 points, or 0.9 percent, to 1,326.06. The S&P is up 5.4 percent for the year and more than 14 percent from its Nov. 25 low.
Apple stock jumped 6.3 percent, helping lift the Nasdaq composite index by 31.67 points, or 1.1 percent, to close at 2,818.31. The Nasdaq is up 8.2 percent this year. Apple once again briefly passed Exxon Mobil as the company with the biggest market value, but by the end of the day, Exxon edged back ahead.