Wall St reaches Lehman-era levels as NZ dollar hits two-year high

The Fed's actions pushed the Dow Jones Industrial Average to its highest level since the week Lehman Brothers filed for bankruptcy in September 2008.

The Dow rose 26.41 points, or 0.2 per cent, to 11,215.13 in New York.

In New Zealand, the kiwi rocketed towards US79c, helped by employment data which suggested the economy was performing better than expected.

The NZ dollar spiked to US78.85c, its highest level since May 2008

"It has all gone the Kiwi dollar's way," said Mike Jones, currency strategist at BNZ.

The NZ dollar made up some ground on the Australian dollar, buying A78.24c by early afternoon from A77.28c at 5pm on Wednesday. The NZX-50 sharemarket index closed down 6.82 points at 3326.25.

In the US, the Standard & Poor's 500 Index gained 0.4 per cent to a six-month high of 1197.96.

The 30-year Treasury yield surged 0.12 percentage point, the most in two months, to 4.05 per cent. The Dollar Index, which tracks trading versus six major peers, lost 0.5 per cent. Oil reached a six-month high of US$84.69 a barrel.

The S&P 500 has rallied 14 per cent and the dollar has slumped at least 3.6 per cent against 16 major peers since Fed chairman Ben Bernanke indicated in August that he might inject more cash into the world's largest economy. Most of the Fed's asset purchases will be of Treasuries due in 10 years or less.

"The bond market is seeing a bigger reaction, given that people were expecting that more buybacks would be concentrated in the long end of the curve," said Paul Zemsky, of ING Investment Management.

"Nothing in here tells me that we should be selling stocks."

Stocks have also rallied since the end of August amid improving earnings and speculation this week's election would produce a divided Congress that won't pass further business reforms.

The Fed's announcement came after American voters frustrated by persistent unemployment and the limp housing market handed control of the House to Republicans and gave the party a bigger voice in the Senate.

The split will probably make it harder for President Barack Obama to enact any major economic initiatives and could put more pressure on the Fed to get the wobbly economy back on firmer footing.

- Bloomberg, NZPA