U.S. stocks surged Wednesday after the Federal Reserve announced a modest reduction in its monetary stimulus program following its two-day policy meeting.

The Dow Jones Industrial Average skyrocketed 292.71 points, or 1.84 percent, to 16,167.97. The S&P 500 rallied 29.65 points, or 1. 66 percent, to 1,810.65. The Nasdaq Composite Index leapt 46.38 points, or 1.15 percent, to 4,070.06.

Both the blue-chip Dow and S&P 500 ended at record highs.

Kenneth Polcari, director of NYSE Floor Operations at O'Neil Securities, Inc., told Xinhua Wednesday that he was not surprised with the market reaction, citing that the tapering amount came in as expected and the Fed vowed to keep the ultra-low interest rates in place in a very long time, which would boost the economy.

The U.S. central bank announced Wednesday that it will cut back its pace of bond purchases, the third round of quantitative easing program, by 10 billion U.S. dollars starting in January, [Hong Kong Company Formation & Registration]with a 5- billion-dollar cut each from the purchases of mortgage-back securities and Treasury bonds.

Moreover, the market welcomed the central bank's projection that the U.S. economy and the labor market would continue to improve.

The Fed expected the gross domestic product of the United States to advance between 2.8 percent to 3.2 percent next year, versus September's projection of a growth at 2.9 percent to 3.1 percent. The unemployment rate is now expected to average between 6.3 percent and 6.6 percent by the end of 2014, compared with an earlier range of 6.4 percent and 6.8 percent.

Positive economic data added optimism to the market's rally. U. S. privately-owned housing starts climbed 22.7 percent in November to a seasonally adjusted annual level of 1.091 million, the highest since February 2008, said the Commerce Department Wednesday. Meanwhile, housing permits dropped 3.1 percent last month.

In corporate news, shares of AMC Entertainment Holdings rose 5 percent to 18.90 dollars after its first day of trading on the New York Stock Exchange Wednesday. Its initial public offering price is 18.00 dollars a share.

The CBOE Volatility Index, widely considered as a fear gauge of the market, slumped 14.87 percent to end at 13.80.

In other markets, oil prices rose Wednesday on positive economic data. Light, sweet crude for January delivery gained 58 cents to settle at 97.8 dollars a barrel on the New York Mercantile Exchange, [Company Registration in USA]while Brent crude for January delivery moved up 1.19 dollars to close at 109.63 dollars a barrel.

Gold futures on the COMEX division of the New York Mercantile Exchange inched up Wednesday, with the most active gold contract for February delivery up 4.9 dollars to settle at 1,235 dollars per ounce.

The U.S. dollar rose against most major currencies Wednesday after announcement of the Fed's tapering decision.

In late New York trading, the euro fell to 1.3751 dollars from 1.3767 dollars in the previous session, and the dollar bought 103. 60 Japanese yen, higher than 102.67 yen of the previous session.