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Fed decision lifts stocks

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Fed decision lifts stocks

Stocks in the US started off on a positive note ahead of the Fed decision on its quantitative easing program. Expectations coming into the Fed decision were for the FOMC to tapering its bond purchases by approximately 10-15 billion dollars’ worth of treasuries and mortgage backed securities.  Post the Fed decision, Chairman Ben Bernanke has a press conference with a prepared statement and a question and answer session that shed some light on futures monetary policy decisions.

Stocks soared after the Fed announced that they would keep their QE program unchanged, and it would stay that way until economic conditions warranted a change in monetary policy.  Forward guidance remained unchanged.

One of the risks heading into the decision by the Fed was the expectations for forward guidance. Possibilities included a lower inflation target and projections for a 2.5% or a change in the Fed Funds target for 2016.

In corporate news, FedEx reported quarterly earnings and revenue that edged above Wall Street’s expectations on Wednesday as the company cut costs and its lower-priced ground shipping business. The company earned $489 million or $1.53 a share for first quarter that ended Aug. 31, up from $459 million or $1.45 a share last year. Revenue increased 2 percent to $11 billion from $10.79 billion a year ago. Analysts had expected FedEx to report earnings of $1.50 a share on $10.97 billion in revenue.

In economic news, Housing Starts for August increased by 0.9% which was in line with expectations versus a 5.8% climb in July while building permits declined by 3.8%.

The S&P 500 index closed at a new all-time higher, slicing through resistance near 1705.  Momentum as reflected by the MACD (moving average convergence divergence) index is very strong with the index hitting its highest levels since early July.  The RSI (relative strength index) is flashing a warning sign, printing at 72, which is above the oversold trigger level of 70.

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