Stocks Rally Ahead of FOMC Meeting

Stocks are rallying in early trading, which is a bit of a surprise ahead of a big FOMC meeting. Usually trading is somewhat quite ahead of the meetings, and then the real action starts after the announcement. It will be interesting to see if we can build on these large, early gains after the Fed meets today.

In economic news, new home sales were a bit disappointing, falling -0.6% vs. consensus of +2.3%. Homebuilding stocks (XHB) are rallying nearly +3% nonetheless. But the durable goods orders were much better than expected, rising +1.8% vs. expectations for +0.9%. This is helping boost industrial stocks (XLI) +2.5%.

There was also a solid earnings report from ORCL last night, which is helping the tech sector as well. ORCL beat estimates, and also raised guidance a bit.

Before the open, the WSJ reported that the OECD said that the global recession is close to bottoming out. This likely improved sentiment, but it is a different picture than the World Bank recently tried to paint recently, when it reduced its forecast for the global economy.

Asian markets rose overnight; the dollar is up a bit, but so are commodities today (oil, gold); the 10-year yield is a touch higher to 3.65%; and the VIX is back down below the key 30 level, down -5.7% to 28.80.

Trading comment: Could today be the start of the oversold, quarter-end bounce I have been talking about? Holding those trading positions overnight worked out for me. I took profits on FCX and GS this morning. I am still holding my S&P 500 etf (SSO), as I think the market should hit a higher level at some point before quarter-end. If that occurs, I will look to take profits on some of our etfs, and add to my hedges. The summer months are usually sideways at best, and maybe down, so I want to decrease my net long exposure accordingly.

long SSO