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After The Close - The U.S. stock market was extremely volatile today. However, after a weak showing in the morning, the major averages sharply reversed direction at about 2:00 PM (EDT) and closed on a high note. The rationale for this about face was that investors were quite happy with the outcome of the FOMC’s two-day meeting. While many expected a shift in policy, it seems that the Fed, still protective of the economic recovery, will maintain an accommodative monetary policy with no immediate plans to curtail its asset purchases.

At the close, the Dow Jones Industrial Average was up about 147 points; the broader S&P 500 Index was 21 points ahead; and the NASDAQ, was higher by 38 points. Market breadth was decidedly positive, with advancing issues ahead of decliners by about 5 to 1 on the NYSE. Further, all of the market sectors moved higher. Specifically, the basic materials group showed leadership, with gains in the metals and miners. The basic materials and industrials have been rebounding lately, possibly on improved demand from China, and this may be something to watch for. The higher-yielding utilities and financials, which tend to be interest-rate sensitive, rallied on the news, too. While there was no real weakness in the market today, the healthcare issues lagged slightly.

Technically, the stock market continues to run higher, and to record levels in some cases, as the bulls have the upper hand once again.  However, it should be noted that at this point, the market has rebounded sharply in a very short time, and a period of consolidation may be in order. Further, equities now trade at price-to-earnings multiples that are bit elevated, and this could be an area of concern. Elsewhere, sentiment may also be getting “overly” bullish. The VIX, which moved sharply lower to about 13.85 today, may indicate that conditions are getting overbought.

The economic news was mixed this morning. Housing starts came in at 891,000 units, annualized, for the month of August. While this result was a bit lower than anticipated, it was up from July’s the downwardly revised showing. Meanwhile, building permits, which are more forward looking, were a bit weaker than many had expected. Tomorrow, the employment situation will receive some attention, as the weekly initial and continuing jobless claims are set to be released. We will also get another look at the housing market, as existing home sales for August are due out.

In the corporate news, a few visible companies posted their results today. FedEx (FDX) shares traded sharply higher, after the transportation giant put out decent profits. In technology, Adobe (ADBE) stock moved up, as that company posted decent quarterly results, but more importantly, has shown progress with its new strategic direction.   - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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3:05 PM EDT - The U.S. stock market reversed course and is now trading sharply higher. Traders, no doubt, were happy to hear that the Fed will be maintaining its accommodative monetary stance. That specifically means that it has no immediate plans to taper its bond-buying program.  At about 2:40 PM (EDT) in New York, the Dow Jones Industrial Average is up 147 points after earlier having been off about 60 points; the broader S&P 500 Index is ahead 20 points; and the tech-heavy NASDAQ is tacking on 33 points. Market breadth suggests widespread buying of equities, as advancers are well ahead of decliners now. Further, all the major market sectors are now well into positive territory. -Adam Rosner

At the time of this article’s writing the author did not have positions in any of the companies mentioned.

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12:15 PM EDT - As we past the midday hour on the East Coast, the major U.S. equity indexes are not all that far removed from the neutral line, though there definitely is a bearish tone to trading. It should not come as a big surprise that the major averages are trading in a tight band, with investors—as we noted in our market commentary yesterday—unlikely to take a major position ahead of the Federal Reserve’s monetary policy meetings’ conclusion this afternoon. The Federal Open Market Committee is about to wind up its two-day meeting, which many pundits feel will bring news that the lead back will modestly scale back on its asset purchases, beginning this month. However, the recent pickup in selling in the small- and mid-cap market may be any indication of some growing nervousness on the part of investors ahead of the Fed news and a reaction to a report from Speaker of the House Boehner that his party will seek to defund ObamaCare and would raise the debt ceiling if the President agreed to postpone the program one year.

Given that the market’s recent rally has left most indexes close to their all-time or 52-week highs, a harsh tone to today’s Federal Reserve Statement could prompt some overdue profit taking in a market that is clearly overextended right now. The S&P 500 Volatility Index (or VIX), is currently trading around 14.5, a level that indicates that buying is very overheated. Our sense is that the investment community, which already seems to have priced in a forthcoming pullback in bond buying, will be more focused on the scope of the initial tapering and if the Fed provides any clues on when the bulk of the expected cutback may take place.

From a sector perspective, the technology group continues to display some relative strength. The performance of the technology stocks is lending some relative support to the NASDAQ. Meantime, we are seeing some profit taking in all of the major sectors, including the consumer staples and telecom sectors. Some of this may have to do with the sentiment that an announcement of a bond tapering this afternoon may push interest rates higher. That would make fixed-income securities a more attractive option for income-seeking investors, and possibly lessen the appeal of the high-yielding, but more risky equities that are found in those groups.

Meantime, we did receive some important economic news this morning, though it has clearly taken a backseat to the forthcoming Federal Reserve statement (due at 2:00 P.M. EDT), Specifically, the Commerce Department reported that housing starts had just increased slightly in August, coming in at an annualized rate of 891,000 homes, while building permits had declined last month, falling from July's unrevised 954,000 homes to 918,000 units in August—expectations had been for a gain to 915,000 homes. While the report was mildly disappointing, the flattening out in starts could serve to keep inventories in check and thereby provide some solid underpinning to prices. All in all, the report was not a game changer and likely had little effect on the Federal Reserve’s thinking today. However, the stocks of the major homebuilders are down modestly on the building data.

Looking ahead to the second half of the trading day, as noted, the investment community’s attention will be clearly focused on the Federal Reserve’s statement and Chairman Ben Bernanke related media conference. What the Federal Reserve has to say will in all likelihood drive the direction of trading over the last two hours of today’s session—and possibly the remainder of this week. Stay tuned. - William G. Ferguson 

At the time of this article's writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The SurveyInvestors’ attention will certainly be focused on today’s meeting of the Federal Open Market Committee, but there is some corporate news to be aware of, as well. On the earnings front, shares of package delivery company FedEx (FDX) and software developer Adobe Systems (ADBE) are moving higher in early trading (with ADBE showing the most strength), as investors appeared pleased with their August-period results. Wall Street was less impressed with quarterly financials from restaurant operator Cracker Barrel Old Country Store (CBRL) and packaged foods company General Mills (GIS), however, and those stocks are down as a result. – Matthew E. Spencer 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Before The Bell - The Federal Reserve started its long-anticipated two-day FOMC meeting yesterday morning and will conclude that closely watched confab early this afternoon. So far, at least judging from the further modest climb in the equity market yesterday, the Wall Street sentiment seems to be rather positive, with most equity investors apparently expecting the lead bank to just gently start to pare its aggressive bond-buying activities.

That sentiment would logically explain yesterday's solid showing by the stock market, in which the Dow Jones Industrial Average added almost 35 points, while the tech-heavy NASDAQ rose 29 points, an especially strong performance.

Thus far, it has been a stellar September following a dour August, in which some moderate profit taking had taken place. Now, with these recent gains, just about all of that earlier setback has been reversed and most of the averages are near either all-time or 52-week highs, with the small-cap Russell 2000, in fact, having made such a record peak yesterday. In all, the most recent day's action made it 11 gains for the 30-stock Dow Jones Industrial Average in the past 14 sessions. Overall, the market seems to be rather calm ahead of the FOMC meeting's conclusion, apparently expecting no major surprises from the central bank.

Indeed, the consensus expectation is that the lead bank will cut its $85 billion monthly bond-buying initiatives by just $10 billion to $15 billion. Anything above $20 billion, however, could spark a nasty reaction by those long equities, in our opinion. Also, with Larry Summers out of the way as far as succeeding Ben Bernanke as Fed Chairman is concerned, and a more dovish Janet Yellen the odds on choice to get the job at this time, the markets are less jittery in that regard as well. So, we have had the steady rise in prices in recent weeks.

As to other developments, the Labor Department reported another benign inflation metric yesterday morning, as it issued key data showing that the Consumer Price Index had risen by a mere 0.1% in August. And this morning, the Commerce Department has just released a report showing that housing starts had increased by less than expected in August, gaining a mere 0.9% to 891,000 starts last month. Expectations were for starts to rise to 918,000. Building permits, more of a leading indicator, fell modestly, meantime, as had been forecast. Neither of these reports, however, is likely to unduly influence the Fed to either accelerate or slow down the bond-buying process.

Meanwhile, the strong market and corresponding decline in the VIX volatility index is again raising red flags about the market's now once again more frothy nature. So far, when we have gotten to these elevated levels, there has been some selective easing in the market's excesses, although no major reversals have taken place. With the economy seemingly sufficiently resilient to handle the expected tapering, with earnings still generally on the rise, with inflation low, and now with the international situation, albeit still worrisome, a bit less frenetic at this moment, the stock market could get a bit pricier still in the days and weeks to come, at least as long as the Fed does not pull a major surprise here.       

As far as this morning is concerned, the weaker housing data has not dulled Wall Street's apparent appetite for stocks this morning, but there could well be some skittishness ahead of the FOMC meeting's conclusion. Taking all of this together, Wall Street opened on a mixed note with the Dow easing back somewhat, while the NASDAQ is climbing further.   - Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.