Stocks Roar Higher as All Eyes Turn to the Fed


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The markets zipped higher for the second day in a row Tuesday as traders grew optimistic ahead of the Fed's policy decision.

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Today's Markets

The Dow Jones Industrial Average climbed 138 points, or 0.91%, to 15318, the S&P 500 gained 12.8 points, or 0.78%, to 1652 and the Nasdaq Composite jumped 30.1 points, or 0.87%, to 3482.

The markets kicked off the week on a high note, rallying amid hopes the Federal Reserve won't trim down its bond-buying program too soon. The focus was expected to remain on the U.S. economy, with the central bank starting its two-day policy-setting meeting and two economic reports out.

The Fed's meeting concludes with a decision on Wednesday, and a press conference from Chairman Ben Bernanke. Wall Street widely expects the central bank to say it plans on continuing to buy $85 billion in bonds a month. Although, any hint that the rate will be slowed down is likely to be closely scrutinized, traders said ahead of the decision.

"Recent bouts of positive correlation between equities, bonds and commodities suggest that the Fed’s stimulus inflated prices of financial assets, and removal of the stimulus could create a tail event in which prices of most of assets could go down," a team of analysts at J.P. Morgan Chase wrote to clients on Monday.

The Labor Department said inflation at the consumer level ticked  up 0.1% in May, slightly less than the 0.2% increase economists’ expected. Excluding the food and energy components, prices were up 0.2%, matching forecasts.

Meanwhile, the Commerce Department reported U.S. housing starts increased 6.8% in May from April to an annualized 914,000-unit rate. Housing permits decreased 3.1% for the month to an annualized rate of 974,000 units.

Elsewhere, Deutsche Bank called an end to the "historic bull-run" in commodity prices, saying prices "are likely to be in subdued territory for years to come." Oil climbed 70 cents, or 0.72%, to $98.47 a barrel. Wholesale New York Harbor gasoline advanced 0.9% to $2.882 a gallon. In metals, gold dipped $15.60, or 1.1%, to $1,368 a troy ounce.

Foreign Markets

The Euro Stoxx 50 fell 0.12% to 2699, the English FTSE 100 climbed 0.73% to 6377 and the German DAX dipped 0.1% to 8208.

In Asia, the Japanese Nikkei 225 edged lower by 0.2% to 13007 and the Chinese Hang Seng was flat at 21226.

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