Although the Fed’s policy statement yesterday packed few surprises, traders were relieved that the Fed had voted to keep interest rates at exceptionally low levels. Traders also took a breather from news that Standard & Poor’s had taken Greece off its “creditwatch negative” rating.
Nevertheless, the rally fuelled by the Fed sent the broader S&P500 shares to fresh 17-month highs yesterday. As speculations of higher interest rates took a backseat, the US dollar fell 0.7% against a basket of currencies. Plans by European officials to help Greece should its finances warrant sent the euro as well as the British pound higher, and hurt the dollar. Nevertheless, that was good news for commodities as well as resource-related shares. Crude prices jumped 2.4% to $81.70; gold prices increased 1.5% to $1,122.50. The Dow average gained 43.83 points, or 0.4%, to 10,685.98. The Nasdaq composite index rose 15.80 points, or 0.7%, to 2,378.01, its highest close since August 2008.
On the DJIA, 23 of its 30 components closed in the green; on the S&P 500, 406 components closed with gains; of the Nasdaq-100, 74 shares finished the session higher.
General Electric (NYSE:GE) shares touched their year-high before markets closed on Tuesday, and led the DJIA gainers with a 4.5% jump. GE said GE Capital’s losses could peak in 2010. Intel (NASDAQ:INTC), also a DJIA component, jumped 4% on reports the company has already shipped more than 100,000 of its newly-introduced Xeon 5600 server chips, and speculation the company will soon raise its earnings and revenue guidance for the current quarter. Harley-Davidson (NYSE:HOG) shares jumped 7% on speculation the company could be a takeover target. Boeing (NYSE:BA) shares fell 1% on news Air Berlin had cancelled orders worth $1.7 billion for its 787 Dreamliner.
All ten S&P500 industry sectors closed with gains. Basic material shares were the leading gainers, up 1.7%, and financials advanced 1.3% as Fed renewed its pledge to keep interest rates at exceptionally low levels. Higher growth assumptions sent industrials up 1.1%. Utilities rose 1.0%, oil and gas shares advanced 0.9%, technology shares rose 0.8%, consumer services 0.7%, consumer goods 0.4%, health care and telecommunications 0.2%.
Although investors saw new evidence of a weak housing sector, housing shares managed to close with gains. Toll Brothers (NYSE:TOL) shares advanced 3.1%; Lennar (NYSE:LEN) shares rose 4%; Hovnanian Enterprises (NYSE:HOV) jumped 5.3%. According to billionaire real estate investor, Sam Zell, equities stand pointed to extend current gains as the economy improves and government intervention wanes, with the housing market expected to start recovering by 2010’s end, and strengthening in mid-2011.
Today’s report of weekly US crude stockpiles is expected to reflect higher imports, rising for the seventh straight week with a 1.1 million-barrel build in crude stockpiles. Meanwhile, OPEC ministers in Vienna agreed to leaving production levels unchanged, despite some concerns over lofty supply levels.