Stocks jump on hopes the Fed will keep rates low
The Dow jumps nearly 140 points ahead of a big Federal Reserve decision on interest rates. Crude oil closes above $98.
But if traders are wrong, watch out.
Stocks rose for a second day in a row Tuesday, and the Dow Jones industrials ($INDU) finished up 138 points to 15,318, its second day of gains of 100 points or more. The close was about 91 points below its peak close of 15,409.39, set on May 28.
The Standard & Poor's 500 Index ($INX) and Nasdaq Composite Index ($COMPX) also moved higher in a broad rally. Crude oil closed above $98 a barrel for the first time since September.
The S&P 500 climbed 13 points to 1,652. The Nasdaq added 30 points to 3,482. Crude oil (-CL) finished at $98.44 a barrel in New York, its highest close since hitting $99 a barrel on Sept. 14, 2012. Gold (-GC) fell $16.20 to $1,366.90 an ounce.
The Fed will announce its policy on rates on Wednesday morning, followed by a news conference at 2 p.m. ET with Chairman Ben Bernanke. Those events will be closely followed by investors and traders around the world, for hints of where the central bank will move next.
The focus will be on two key questions:
- Will the Fed change its stated goal of keeping rates low until the national unemployment rate drops below 6.5%?
- And will the Fed start to trim its campaign of buying of Treasury and mortgage bonds, now at $85 billion a month?
The answer to the first question probably will be in the Fed statement, and it will repeat what the Fed has been saying: It expects its federal funds rate to remain at exceptionally low levels through at least late 2014.
Bernanke will be repeatedly asked what the catalyst might be to cause the Fed to dial down its bond-buying program. He will annoy everyone by not offering an answer. But the market sees non-farm payroll growth of 200,000 or more as a potential trigger.
The key task for the Fed chairman is to explain his reluctance to discuss specific conditions without setting off a sell-off. That's what happened at a May 22 Congressional hearing.
The Fed decision on Wednesday will contain one dissent: from Esther George, the president of the Federal Reserve Bank of Kansas City. She believes the Fed should start raising rates now to head off a re-ignition of inflation pressures.
The market was led by industrial stocks and consumer discretionary stocks such appliance-maker Whirlpool (WHR) and La-Z-Boy (LZB).
Twenty-eight of the 30 Dow stocks were higher on Tuesday, led by General Electric (GE), Verizon Communications (VZ) and American Express (AXP). Merck (MRK) and Microsoft (MSFT) suffered small declines. (Microsoft is the publisher of MSN Money.)
In addition, 423 S&P 500 stocks were higher. At the same time, 85 stocks in the Nasdaq-100 Index ($NDX) were higher. The index was up 25 points to 2,996.
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Crude oil $100 a barrel on speculation Ben will keep printing and devaluing the dollar. Supply and
demand and free markets are a thing of the past when you have Wall St. controling the Fed.
Contrary to what the Federal BLS and Fed Reserve like to say, real inflation is well above the "official" rate. Wage pressures are low, because of foreign cheap production costs. Since spending power of most consumers has been wiped out because of a worthless dollar and low wages, the economy cannot recover to where it once perched. Also, the Federal Government prints nearly 1/2 of the money it spends on operation costs. And the real problem is entitlements, European style welfare will eventually lead to higher unemployment, further redistribution, stifled productivity and in the end, ruin. History has repeatedly shown that confiscating the wealth of savers end badly for society, the US is no different. All moves by the Federal Reserve are merely postponing the day of eventual ruin.
These folks have told us, we can do whatever we please, whenever we please and you can't do a dam thing about it. Now because of this sense of Entitlement by the Elite, the Global Feds are Printing 24/7 just to keep afloat, the farce balances of all the Big Banks. It's not about creating jobs nor controlling inflation, it's about protecting the very Wealthy and leaving crumbs for the rest of us. Amazingly, some poster seem to be fine and dandy with that BS. The unrest in Turkey and Brazil as the elite spit on the rest of us might be the canary in the Coal Mine. Hopeful it is and workers finally take back their respective countries.
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