Stocks are on the sky again

Stocks Rally Ahead of Fed

By STEVEN RUSSOLILLO

NEW YORK—U.S. stocks rose Tuesday morning in what is expected to be another volatile session as investors awaited the Federal Reserve's policy statement and any hint that the central bank will be able to calm markets and boost the economy.

The Dow Jones Industrial Average was recently up 228 points, or 2.1%, at 11037. The index briefly turned negative shortly after the opening bell, but has rallied since.

Bank of America led the measure higher, rising 4.8% after tumbling 20% in Monday's rout. J.P. Morgan Chase gained 4%. The Dow fell 635 points on Monday, the sixth-biggest point drop in its history, to close at a 10-month low.

The blue-chip index fell beneath 11000 for the first time since November in the wake of Standard & Poor's downgrade of the U.S. government's credit rating. Jittery investors have fretted over government debt and the possibility that the economy could slide into another recession.

The Standard & Poor's 500-stock index climbed 26 points, or 2.3%, to 1145, led higher by financial and material stocks. Financial stocks were hit the hardest in Monday's drubbing. The technology-oriented Nasdaq Composite gained 61 points, or 2.6%, to 2418.

"We've been vastly oversold for the last three days," said Keith Bliss, senior vice president at Cuttone & Co., a brokerage on the New York Stock Exchange floor. "A little relief rally isn't unexpected. The absence of any bad news gave the markets a chance to come back a little bit."

Markets Hub's Paul Vigna and Shira Ovide watch the market moves on the opening bell after a day of historic sell-offs, as the markets digest new economic data and await a statement from the Federal Reserve. (Photo: Getty Images.) :

.Investors will be closely watching the Federal Reserve's monetary policy setting committee's statement, which is scheduled for release at 2:15 p.m. Eastern time. They want an indication of just how worried policy makers are about the market's recent slide as well as the slowing economy. Any indication that the central bank still has options to boost the economy could be interpreted optimistically.

Speculation has ramped higher that the Fed may need to come to the rescue again, including potentially launching a third Treasury bond-buying program, to stimulate the economy. The Fed finished its $600 billion Treasury bond buying program in June, known as the second round of quantitative easing. If "QE3" isn't a feasible option, investors will look for the Fed to announce some alternative to a full-fledged bond-buying plan.

"Everybody's looking for some sort of information or insight in terms of what the Fed's going to do in the near future," said Jonathan Corpina, senior managing partner at Meridian Equity Partners. "We need to hear some sense of urgency and some sort of plan to stabilize markets and the economy. If we don't get anything specific, this rally could fade."

On the economic front, the Labor Department reported that U.S. productivity fell in the second quarter, while labor costs continued to rise amid a tepid economic recovery. Nonfarm business productivity fell at a 0.3% annual rate in April through June, after decreasing 0.6% in the first three months of 2011. The first-quarter figure was revised down sharply from an originally reported 1.8% rise.

Gold futures reflected continued extreme investor anxiety, as the safe-haven asset shot up above $1,743 an ounce, adding to Monday's record settlement on the New York Mercantile Exchange. Crude-oil futures fell below $81 a barrel after settling Monday at the lowest level of the year. The U.S. dollar lost ground against both the euro and the yen.

In corporate news, E*Trade Financial bowed to pressure from its largest shareholder, Citadel LLC. The financial company said its board formed a new special committee of independent directors, which hired Goldman Sachs, to conduct a review of strategic alternatives. Shares rose 1.1%.

Dow component Walt Disney is scheduled to report fiscal third-quarter results after the closing bell. Shares gained 1.6%.

Source : wsj.com - 09/08/2011.