Traders see enough of a change in the Fed statement to push stocks sharply higher Wednesday. The Dow ($INDU) added 159.42 points on the session to close at 12,447.52. The S&P 500 ($SPX) tacked on 24.10 points to 1,435.04. The NASDAQ ($COMPQ) gained 47.71 points, or 1.98 percent, to close at 2,455.92. Volume was solid on the session with the NYSE trading 1.63 billion shares and the Naz turning over 2.21 billion shares. Market breadth was positive by a 27-to-6 and 23-to-8 margin on the Big Board and Naz respectively.
The changes in the FOMC statement might have been microscopic, but this was enough to provide hope of a rate cut later in the year. If nothing else, traders viewed the statement as showing that the Fed is at least not going to raise rates anytime soon.
The FOMC left the Fed funds target rate at 5.25 percent, making some minor changes to their statement in the process. One such change was the elimination of the phrase that some firming might still be needed. However, the committee did not that inflation pressures remain and have not come down like they expected. They also are concerned with high resource utilization rates, which could also keep pricing pressures high.
If nothing else, the statement wasn't as hawkish toward rates as they could have been and this provided the bulls a reason to buy. Today was the third straight session of strong gains, leading to the view that a solid bottom has formed after stocks took a hit several weeks ago.
The fact that two major technology stocks announced solid earnings last night also helped stocks Wednesday. Shares of Oracle (ORCL) and Adobe (ADBE) rose 3.53 percent and 6.28 percent respectively. Both software makers exceeded analyst expectations on strong profit growth and confirmed guidance going forward. This led to positive comments from several brokers and lifted both stocks higher. Overall, the GSTI Software Index ($GSO) moved higher by 2.38 percent.
It will be interesting to see if the bullishness continues tomorrow given the lack of market moving news on tap. However, Fed Chairman Bernanke could influence stocks when he speaks Thursday, though it is unlikely he will talk much about monetary policy.
Senior Staff Writer & Options Strategist
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