Market Wrap for Tuesday, June 18: Stocks Rally Ahead of Fed Statement
Risk appetite was brisk on Wall Street on Tuesday as investors purchased stocks ahead of Wednesday's FOMC statement. The Fed is expected to provide clarity on when it may begin tapering its current $85 billion per month bond buying program.
Although there is uncertainty, the market seems to be pricing in the likelihood that the Fed will continue its dovish monetary policy for the foreseeable future in order to keep interest rates down and stimulate the economy.
Ahead of Wednesday's Fed commentary, the Dow rose triple digits for the second day in a row and both the S&P and Nasdaq also posted strong gains.
The Dow Jones Industrial Average rose 138 points, or 0.91 percent, to 15,318.
The S&P 500 climbed 13 points, or 0.78 percent, to 1,652.
The Nasdaq rose 30 points, or 0.87 percent, to 3,482.
Consumer prices rose 0.1 percent for the month of May. This was the first increase in CPI since February and compares to a decline of 0.4 percent in April. The consensus expected CPI to rise 0.2 percent in May.
Core CPI, which excludes volatile food and energy costs, rose 0.2 percent in May versus a gain of 0.1 percent in both March and April. This compares to consensus estimates calling for an increase of 0.1 percent.
New home starts rose 6.8 percent in May to 914,000. This compares to 856,000 new starts in April and consensus expectations calling for housing starts of 950,000 last month.
Crude oil rose along with the stock market on Tuesday. Late in the day, NYMEX crude futures were up 0.70 percent to $98.45. Brent contracts had climbed 0.51 percent to $106.01. Natural gas added 1 percent on the session and was last trading at $3.91.
Precious metals fell on Tuesday. Near the close of equities, COMEX gold futures were down 1.20 percent to $1,366.50. Silver was last trading down 0.63 percent to $21.62. Copper futures lost 1.41 percent to $3.1525.
In the grains complex, both corn and wheat rose on the session. At last check, CBOT corn futures were up 2.23 percent while wheat had added a little better than 1 percent. Movers in soft commodities included sugar and cotton. Sugar contracts traded 1.10 percent lower while cotton lost almost 2 percent.
Bond prices were little changed on Tuesday. Heading into the closing bell, the iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) was down 0.04 percent to $113.18.
Bond yields were as follows; the 2-Year Note was yielding 0.26 percent. The 5-Year Note yield was 1.05 percent. The 10-Year Note and 30-Year Bond were yielding 2.17 percent and 3.35 percent, respectively.
The U.S. Dollar was basically flat on Tuesday. At last check, the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the performance of the greenback versus a basket of foreign currencies, was up 0.05 percent to $21.85.
The closely watched EUR/USD pair was up 0.26 percent to $1.3376. Other movers included the USD/JPY, which climbed 0.54 percent, and the AUD/USD, which fell 0.77 percent.
Volatility and Volume
Despite the triple digit rally in the Dow, the VIX fell less than 1 percent on the session to 16.65. The widely watched measure of volatility expectations should be active on Wednesday in the wake of the Fed statement.
Trading volumes have declined in recent days after being elevated last week. Around 114 million SPDR S&P 500 ETF (NYSE: SPY) shares traded hands on the day compared to a 3-month daily average of 134 million.
Small-cap name Gevo (NASDAQ: GEVO) was trading up more than 20 percent late in the day after the company resumed production of isobutanol at its plant in Luverne, Minnesota.
Applied Micro Circuits (NASDAQ: AMCC) surged better than 19 percent on Tuesday on a technical breakout. The $8.00 level in the name had previously been a resistance area.
Flir Systems (NASDAQ: FLIR) climbed 6 percent after the stock was upgraded at Raymond James to strong buy from market perform with a $33 price target.
Cytokinetics (NASDAQ: CYTK) was up better than 28 percent near the close after the company inferred that its experimental drug for acute heart failure will be successful in a mid-stage clinical trial.
Sony (NYSE: SNE) continued a recent rally by adding more than 3 percent on Tuesday after hedge fund Third Point LLC boosted its activist stake in the company.
Hormel Foods (NYSE: HRL) lost a little less than 4 percent on the session after the company lowered its fiscal 2013 earnings guidance.
Biotech firm MannKind (NASDAQ: MNKD) lost more than 12 percent after the company completed a phase III study of its diabetes drug candidate Afrezza. The results of the study will be published later this summer. Traders reacted to the news by taking profits in the stock, which has been up sharply in recent months.
GenMark (NASDAQ: GNMK) fell almost 13 percent on Tuesday after the company lowered its full-year revenue guidance.
John Wiley & Sons (NYSE: JWA) lost better than 4 percent after reporting disappointing fiscal fourth-quarter financial results and guided for full-year adjusted EPS below current consensus.
Ship Finance International (NYSE: SFL) fell around 6 percent on Tuesday after the company announced an eight million share secondary offering.
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