Stocks rally ahead of Fed decision
The Federal Reserve may say interest rates will remain low for at least 2 years. The Dow and S&P 500 enjoy their 5th straight gains. An Apple rally that began Monday boosts the Nasdaq. Dollar General's caution hurt discount retailers.
Stocks moved higher Tuesday with the Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) each rising for a fifth straight day thanks to a big rally in technology stocks, but hopes for a resolution of the fiscal cliff crisis faded in the afternoon and trimmed the market's gains. Apple (AAPL) was one of the main fuels for the rally, rising $11.42 to $541.24. On Monday, the shares dropped to as low as $521.58 in the morning but rebounded a bit in the afternoon. The rebound continued Tuesday.
Apple's surge pushed the Nasdaq Composite Index ($COMPX) to its biggest one-day gain in more than two weeks, and the index moved into positive territory for December. The technology sector of the S&P 500 was the index's strongest.
The Dow closed up 79 points to 13,248. The S&P 500 was up 9 points to 1,428, and the Nasdaq added 35 points to 3,022, its first close above 3,000 since Dec. 3. The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was up 35 points to 2,682. In addition, expectations that the Federal Reserve will affirm its commitment to support the economy in the event budget talks fail also was a factor. The Fed will announce its policy for the next two months on Wednesday.
The Fed is widely expected to reconfirm its expectation that interest rates will remain at ultra-low levels until mid-2015.
It is also expected to announce it is converting a program popularly known as Operation Twist into a broader bond-buying program that the media will call QE 4.
QE is short for quantitative easing, which essentially means the Fed buys outstanding government debt, helping to keep rates low. The bond-buying program, the Fed's 4th since the 2008-2009 market crash, have been the central bank's main tools for keeping rates low.
Twenty-six of the 30 Dow stocks were higher, along with 367 S&P 500 stocks and 82 Nasdaq-100 stocks.
In addition to Apple's gain, a number of big tech companies saw shares rise nicely, including Research In Motion (RIMM), Texas Instruments (TXN), Google (GOOG), Intel (INTC) and Amazon.com (AMZN).
Discount retailers were hurt by a note of caution about the holiday shopping season from Dollar General (DG), which was off $3.63 to $42.90. The company was worried about intensifying competition this holiday shopping season.
Family Dollar Stores (FDO) fell $5.90 to $64.68 while Dollar Tree (DLTR) fell $1.46 to $37.98.
Wal-Mart Stores (WMT) was off $1.26 to $70.89 and was the weakest of the 30 stocks. Target (TGT) dropped 53 cents to $61.43.
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It will be interesting to see the market impact of QE4. The law of diminishing returns is kicking in and even the insiders aren't trusting each other to continue running the market up. Eventually, Congress has to do SOMETHING to reestablish some firm footing under this economy. It's built on Fed money right now and that can't go on forever.
Why not pass a law that everything in Walmart has to be US made? Watch the factories go up and the jobs come back. Screw trickledown, we need a firehose!
Capital aggregators like mutual funds and pensions are withdrawing from private fixed income because they can get 1% risk free from the treasury. The printing press is crowding out private investment in enterprise and causing MALINVESTMENT in hard assets and government securities. This does not help the economy.
End the Fed and some other regulations and let markets get the rates optimized. No government policy has ever or could ever match the aggregate wisdom of markets over time.
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MARKET UPDATE
[BRIEFING.COM] The major averages ended modestly lower with the S&P 500 shedding 0.3%.
The benchmark average saw an opening loss of 1.2% after Japan's Nikkei tumbled 7.3%. Japanese stocks sold off amid continued volatility in Japanese Government Bond futures as the 10-yr yield spiked almost 16 basis points to 1.002 before the Bank of Japan's JPY2 trillion liquidity injection caused yields to retrace their gains.
Adding insult to injury was news out of China where the HSBC ... More
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With Europe mired in recession, China faltering, commodities declining and stocks looking vulnerable, investors seeking safety will look to the greenback.
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