U.S. stocks close higher ahead of Fed decision
NEW YORK (MarketWatch) -- U.S. stock indexes on Tuesday finished at five-week highs after upbeat housing data, as the Federal Reserve considered further moves to stimulate the economy.
"Like any good investor, we remain on the conflicted sidelines," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, adding that the market's surge "does seem like it's more out of hope for something than anything coming from hard fact."
The Federal Open Market Committee began a two-day session Tuesday, with McCain echoing a view held by many that the most to be expected would be an extension of the Fed's "Operation Twist" program, of selling short-term securities while buying longer-term ones, to keep a lid on long-term interest rates.
"It's the size and duration of the program that is most important," said Jeffrey Kleintop, chief market strategist at LPL Financial in Boston.
After a 157-point climb, the Dow Jones Industrial Average (DJIA) closed up 95.51 points, or 0.8%, at 12,837.33.
The S&P 500 Index (SPX) rose 13.2 points, or 1%, to 1,357.98, with materials and financials the leading performers among its 10 industry groups.
Stephen Carl, head equity trader at the Williams Capital Group in New York, attributed the rally in the banking sector in part to testimony by J.P. Morgan Chase & Co. (JPM) Chief Executive Jamie Dimon on Capitol Hill, saying the impression is that Dimon is "handling himself well."
The Nasdaq Composite Index (COMP) added 34.43 points, or 1.2%, to 2,929.76.
For every stock that lost ground more than five gained on the New York Stock Exchange, where volume topped 772 million shares. Composite volume neared 3.8 billion.
The euro (EURUSD) rose to a near-monthly high against the dollar, and was lately at $1.2685.
The major indexes came off session highs after Reuters reported that European Union and German government officials had said there was no discussion at the Group of 20 meeting about a rumored plan to use bailout backstop funds to purchase government bonds of crisis-hit member states.
Both McCain and Carl pointed to good numbers on the long-beleaguered housing market as supporting equities, with the government saying builders broke ground on fewer new homes in May, but the prior month's starts figure was increased, while permits for future construction shot to a near four-year high. Read full story on housing data.
"The housing numbers are getting better. We seem to be forming a base within housing that is still not overly dynamic, but coming back from what it was. It suggests housing is going to help support the economy, rather than be a net drag," said McCain.