Fed statement provides incentive to buy, leaving stocks with solid gains Tuesday. The Dow (DJI) closed the session with a gain of 43.83 points to 10,685.98. The S&P 500 (SPX) added 8.95 points to 1,159.46 with the Nasdaq (COMP) tacking on 15.80 points to 2,378.01. Volume remained light once again at 1.02 billion shares on the NYSE and 2.14 billion shares on the Naz. Market breadth was positive by a 22-to-8 and 17-to-10 margin on the Big Board and Naz respectively.

The bulls refuse to give up control of the stock market, leading to the break of resistance for the SPX. The 1,500 level had been rejecting the movement of the SPX, but this level was solidly broken Tuesday. Strength on the session was broad-based, led by gains in Intel (INTC) and General Electric (GE). However, the bulk of the days strength came following the FOMC statement.

The Fed, as expected, left rates near zero and also did not change their statement. This was the focus going into the statement with some traders afraid language hinting at long term low rates would be changed However, the statement remained the same with the committee noting that though they are seeing mild progress in the economy, it isn't enough to look at raising rates.

Intel helped lead a rally in tech stocks after the chip giant released its newest server chip. The release of this chip led to a gain of 3.97 percent for INTC shares to a price of $22.01, its highest price since September 2008. AMD (AMD), which is also slated to release a new chip, also saw gains, rising 5.38 percent to $9.40. Overall, the Semiconductor HOLDRs (SMH) rallied 3.09 percent to $27.66.

GE shares tacked on 4.51 percent today to a new 52-week high, closing at $18.07. The conglomerate benefited from comments by its CFO that the company would see improvements in earnings next year, which would lead to growing the company's dividend. In February 2009, GE cut its dividend for the first time since the Great Depression to offset huge losses in its GE Capital division. Now that they are starting to see some stabilization in the lending, leaders feel they can get back to paying a higher dividend in 2011.

Though the news was mostly positive Tuesday and Friday being quadruple witching, volumes continue to be below average. This puts a little bit of a damper on the gains, as does the CBOE Market Volatility's (VIX) moved back to support. Nonetheless, there is an old saying to not short a dull market and it has proven true so far.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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