Stocks make modest gains ahead of FOMC statement Wednesday. The Dow ($INDU) added 61.93 points on the session to close at 12,288.10.  The S&P 500 ($SPX) tacked on 8.88 points to 1,410.94. The NASDAQ ($COMPQ) gained 13.80 points to close at 2,408.21. Volume was light on the session with the NYSE trading 1.46 billion shares and the Naz turning over 1.73 billion shares. Market breadth was positive by a 23-to-9 and 20-to-10 margin on the Big Board and Naz respectively.

It seems traders are expecting some dovish talk on rates tomorrow from the Fed, with the bulls pushing stocks higher the past two sessions. Prior FOMC statements have been erring on the side of inflation, which has kept the odds of a Fed rate cut down. However, recent economic data has not been as strong and there even has been talk of a recession. This means the Fed is likely to raise its concern about economic growth to be balanced with worries about inflation. 

Worries about the housing sector eased some today when February housing starts came in much stronger than expected. Housing starts rose 9 percent to an annualized rate of 1.525 million units, which easily surpassed estimates for a reading of 1.45 million. However, building permits, which is a precursor to future starts, fell 2.5 percent with single family permits down 3.1 percent. Of course, housing problems could worsen if the subprime problems create fewer available loans to buy homes with. 

Merger deals continue to be a bullish event for the stock market. What started Monday continued today with Affiliated Computer Sercives (ACS) announcing it will go private in a deal worth $8.2 billion including debt. This is a 15.5 percent premium for ACS shares, which rose nearly 17 percent on the session. In other merger news, there is speculation that American International Group (AIG) is ready to make a bid for Prudential plc (PUK). PUK is a U.K. insurer and this news pushed PUK shares higher by 4.3 percent. 

Shares of Oracle (ORCL) rose 2.15 percent in the regular trading session to close at $17.55. After the bell, the software maker announced earnings, showing a 35 percent rise in profits to more than $1 billion. This has pushed ORCL shares higher by about three percent in after hours trading. Adobe (ADBE) shares are also up after hours following its announcement of a 37 percent rise in profits. ADBE close at $40.74 Tuesday, but is up to $42 after hours. 

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site