Stocks Rise Slightly Ahead of Close
Stocks rose after an initial rocky response to the Federal Reserve announcement it would buy $600 billion in long-term Treasurys by the end of the second quarter of 2011 in an effort to stimulate the economy's sluggish growth.
The Dow Jones Industrial Average advanced a few points, after bouncing between positive and negative territory following the news.
Hewlett-Packard and Cisco advanced, while Microsoft and American Express fell.
The S&P 500 Index and the Nasdaq both rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, sank nearly 8 percent to below 20.
Among key S&P 500 sectors, financials, telecom and tech rose.
In the Fed announcement, the central bank said it would buy $75 billion in longer-term Treasury bonds a month, and said it would "regularly review the pace and size of the program and adjust it as needed depending on the path of the recovery." (Click here for a copy of the statement.)
The amount of the Fed's stimulus effort was a little more than the $500 billion expected by the market, although many observers had expected the pace of the purchases to be closer to $100 billion a month.
The end result, however, was largely priced into the market, which explains why stocks fell after the news, said Dan Cook, CEO of IG Markets.
"I don't see this will do very much for our economy," Cook said.
By choosing to buy long-term Treasurys, the Fed is making a bet that lower long-term rates will drive economic activity. But, Cook said, lower rates will cause the economy to ignite only if there already is movement. But in an environment like we have today, with sluggish job growth and slack demand, not much is going to happen, he said.
"They could knock $100 off the price of a Lamborghini, but it would still be out of the range of most people," Cook said.
Before the Fed news, a Republican takeover of the House of Representatives, and a largely positive batch of economic data, did not create much enthusiasm in the market.
Also, President Obama addressed reporters at the White House in his first public appearance since the Republican Party snatched 60 U.S. House seats.
"We must find common ground in order...to make progress," the president said. "We want to engage both Democrats and Republicans in serious conversations about where we're going as a nation."
Investors now need to move on from the major events this week, some market pros said.
“We’re trying to get investors refocused in their portfolio post-election, post-Fed, and focus on areas where we can make some money and look for repositioning into year-end,” Lawrence Glazer, managing director at Mayflower Advisors said on CNBC.
Glazer said stocks are likely to see a "January bounce"and expects areas such as financials and homebuilders, which were less pronounced this year, to see a boost.
In corporate news, sales from the major auto makers were released Wednesday. Ford shares advanced, hitting a 52-week high, after the automaker reported October sales rose 23.2 percent, more than expected. A sales analyst at Ford said October auto sales are projected to hit a pace of 12 million vehicles, which would be a new monthly high for 2010.
Rivals GM and Chrysler also reported results that beat forecasts.
Toyota's results disappointed, however, as sales fell 0.9 percent in October from a year earlier, while Honda's sales climbed 16 percent.
On the tech front, Cisco shares rose more than 1 percent after news the computer network company created software to help companies find and respond to potential customers through social networking sites like Twitter and Facebook.
Google shares climbed after the top Web search provider said it will allocate about $8.5 million to Internet privacy and policy organizations as part of a class action settlement involving its Buzz social hub.
Meanwhile, Motorola fell after news Carl Icahn bought another 15.2 million shares of the wireless phone provider.
BlackRock shares tumbled almost 5 percent after Bank of America said it plans to sell more than half its stakein the global investment management firm. In addition, fellow part-owner PNC Financial Services is selling up to 7.5 million shares. Meanwhile, Goldman Sachs cut its price target on BofA to $16 from $19.
Goldman Sachs also lowered its price target on Wells Fargo to $33 from $37.
Hartford Financial Services jumped after the insurance company swung to a profit on Tuesday, as the major restructuring plan it unveiled in April started to show up in the company's results.
Another handful of earnings were releasedWednesday morning:
Pulte shares tumbled after the homebuilder posted a bigger quarterly loss than expected related to insurance reserves and charges to write down land. In addition, S&P Equity cuts its rating on the firm to "hold" from "buy." Other rivals were trading lower, including Lennar and D.R. Horton , both down more than 2 percent.
Shares of Time Warner fell after the entertainment company reported its revenue rose 2 percent, slightly less than expected.
Garmin plunged more than 8 percent after the digital navigation devices maker missed analysts' expectations and came amid weaker sales and margins.
CVS Caremark was flat after the pharamcy retailer reported a drop in earnings from sluggish salesin its pharmacy benefits division. CVS also cut its full year outlook.
Aetna , meanwhile, reported a surprising jump in earnings, and raised its profit outlook for the full year, sending the health-insurer's shares higher.
The world's biggest brewer Anheuser-Busch InBev reported core profit in the third quarter rose 9.1 percent on a like-for-like basis and forecast earnings would grow at an even faster pace in the fourth quarter.
MGM Resorts , which warned last month that business at its Las Vegas casino-hotels remained soft, reported a narrower loss for the quarter and said business is picking up speed, sending the gaming giant's shares up more than 7 percent.
KKRearnings fell 60 percentdue to a lower rate of appreciation in its core private-equity portfolio. The investment firm also said Wednesday that it raised $700 million for its China growth fund.
Qualcomm , NewsCorp and Chesapeake are slated to report earnings after-the-bell Wednesday.
The dollar was up slightly against a basket of currencies as traders awaited the Fed's decision. Fed purchases of long-term securities were expected to push the value of the dollar lower.
And oil prices rose above $84 a barrelfollowing news that inventories fell sharply last week. The energy sector slumped. BP was among the only gainers in the sector.
On the economic front, private-sector jobs rose by 43,000 from September to October on a seasonally adjusted basis, compared to a revised loss of 2,000 jobs in September, according to the ADP National Employment Report. The September figures was first reported as a loss of 39,000.
Also on the jobs front, planned layoffs were slightly higher in October from a month earlier, but the pace of job cuts remained near a record low, according to outplacement company Challenger, Gray & Christmas.
The reports come two days before release by the government of October nonfarm payrolls, which economists forecast will show an increase of about 60,000 jobs.
In other economic news, an index for the service sector rose more than expected, to 54.3, according to the Institute for Supply Management. The ISM non-manufacturing new orders index was 56.7 in October, up from 54.9 in September.
Also, U.S. factory orders rose 2.1 percentin September, more than expected, and the biggest gain in eight months, the Commerce Department reported. Factory orders had fallen 0.5 percent fall in August.
Plus, MasterCard Advisors' SpendingPulse reported retail sales were strong in October, with gains seen in apparel, luxury goods, and online sales. This come a day ahead of the monthly chain store sales report.
And U.S. mortgage applicationsdropped 5.0 percent last week, marking the sixth time in eight weeks of slowing activity. The four-week moving average was up 0.1 percent, according to the Mortgage Bankers Association.
On Tap Next Week:
WEDNESDAY: FOMC announcement; after-the-bell earnings from Chesapeake Energy, News Corp, Prudential Financial and Transocean.
THURSDAY: Chain-store sales, BoE announcement, jobless claims, productivity and costs, ECB announcement; after-the-bell earnings from Kraft, Activision and Starbucks.
FRIDAY: Pending home sales index, non-farm payrolls report, consumer credit; Kansas City Fed President Hoenig speaks; before-the-bell earnings from Toyota; after-the-bell earnings from Berkshire Hathaway.
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