Will Monday's rally carry over?
The Dow jumps 109 points after rising as many as 191. Oil-price jitters and rising rates trim gains. Those factors and the Fed may weigh on markets Tuesday.
As in: Will the Fed trim its bond buying? Will the Fed move interest rates higher? What exactly is the Fed hoping to accomplish?
The answer on Monday -- and only for Monday -- was yes, the Fed may start to trim its $85-billion-a-month bond buying campaign. "When" wasn't clear. No, it's not moving interest rates higher any time soon. And what the Fed wants is an economy that, for the foreseeable future, can take care of itself and start to expand solidly.
We know this because the stock market ended nicely higher -- after ending un-nicely lower on Friday. In fact, June is now a positive month for stocks. For how long that will last won't be clear until after Wednesday.
Monday's was a solid rally. The Dow Jones industrials ($INDU) ended up 110 points to 15,180. The Standard & Poor's 500 Index ($INX) added 12 points to 1,639. The Nasdaq Composite Index ($COMPX) climbed 29 points to 3,452.
The Dow had been up as many as 192 points. But then that gain shrank to less than 60 points -- and the rally seemed about to fall apart when the Financial Times said Bernanke may subtly suggest some trimming in bond purchases. But how big will depend on the economy. Late buying pushed the indexes higher again.
Transportation stocks ended lower on the day, a hint that maybe the economy isn't as strong as thought.
But Monday's rally comes with this context:
First, oil prices made a brief run toward $99 but fell back. Crude oil (-CL) in New York finished at $97.77, down 8 cents from Friday. Interest rates moved higher, with the 10-year Treasury yield hitting 2.171%, up from Friday's 2.126%.
Second: The Dow has closed up or down more than 100 points for five straight days. It has experienced swings of more than 100 points during the day for 18 of the last 20 sessions. And, for all that, the Dow is down a whopping 1% in that time. The S&P 500 is down 1.6%, and the Nasdaq is down 1.3%.
What all this means is, investors aren't sure where the market is headed and they want a clarifying signal from the Fed.
And they may get something that looks like clarification on Wednesday. But the clarification is likely to be complicated. Europe is still in trouble. Brazil has had problems. There's a big debate about China's health. We don't know if the auto industry can continue to enjoy decent U.S. sales for the foreseeable future.
Investors will get a couple of signals Tuesday -- from the May reports on housing starts and building permits and the Labor Department's consumer price index report. Housing should show some strength overall. What you want to see is gains in single-family starts and permits. They have a bigger effect on the economy.
Twenty-five of the 30 Dow stocks were higher, led by Cisco Systems (CSCO), United Health Group (UNH) and DuPont (DD). Verizon Communications (VZ) and Home Depot (HD) were the laggards.
A total of 410 S&P 500 stocks were higher, led by Netflix (NFLX), up $15.24 to $229.23 after inking a content deal with Dreamworks Animation (DWA).
Netflix and Sandisk (SNDK) were the top Nadsaq-100 ($NDX) performers. Eighty-two stocks in the index were higher, and the index was up 27 points to 2,971.
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As long as the Fed is printing 85B a month to support the market, the market will move higher...
But it will not generate growth or jobs. And it will eventually create massive inflation...
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