A rally on Wall Street gained momentum Thursday afternoon, sending stocks to fresh multi-year highs, as investors welcomed the Federal Reserve's new bond-buying plan.
The Dow Jones industrial average jumped 207 points, or 1.6%, while the Nasdaq rose 1.3% and the S&P 500 gained 1.6%. Prior to the Fed's announcement, all three major indexes had been just 0.2% higher.
The day's gains pushed the Dow and S&P 500 to their highest closing levels since December 2007, while the tech-heavy Nasdaq finished at its highest level since November 2000.
Financial stocks led the broad rally, with the KBW Bank index climbing 2.8% to its highest level since May 2011. Bank of America's nearly 4.8% advance led the Dow higher, while JPMorgan's 3.7% rise helped the stock fully recover the losses it suffered following the 'London whale' disclosure.
As investors moved into risky assets, oil prices spiked 1.3% to $98.31 a barrel. Priced had already been higher amid "concern that protests in the Middle East may threaten supplies," said Wells Fargo Advisors analysts.
Gold, which is used as a hedge against inflation, jumped 2% to hit a nearly 7-month high. And Treasuries, which had had been gaining ground earlier, sold-off sharply, which pushed 10-year yield above 1.8% from 1.72% before the Fed's announcement. The yield settled around 1.74%.
The Fed said it will buy $40 billion of mortage-backed bonds each month for however long it deems necessary. In the past, the Fed has concentrated its purchases in Treasuries.
Housing stocks gained on the news. Shares of homebuilder Hovnanian and Pulte Group rose more than 3%. Lennar and Toll Brothers gained almost 2%.
The Fed also said it plans to keep interest rates at "exceptionally low levels" until mid-2015. Previously, the central bank had forecast rates would remain low until late 2014.
"There's no big surprise here," said Jeffrey Kleintop, chief market strategist at LPL Financial, adding that he expects the initial market enthusiasm will begin to fade sooner rather than later. "The only thing that struck me a bit was that the Fed has left the door open to do more if it needs. This might not be all of it."