Stock Market Rallies On Tapering Move

Wednesday’s trading session provided us with a perfect example of the maxim that the stock market loves certainty and abhors uncertainty.  

More than a few people were surprised to see the Dow Jones Industrial Average skyrocket by 292 points on the day that Ben Bernanke announced a decision by the FOMC to finally initiate the taper of its bond purchases. When Warren Buffett said last May that the Fed’s commencement of the taper would be the “shot heard round the world”, he was not predicting a rally. Nevertheless, the announcement ended several months of nail-biting and sleepless nights ahead of FOMC meetings. More than anything else, the stock market loves certainty. Wednesday’s trading session proved the validity of that old maxim.
 
The Dow Jones Industrial Average (DIA) picked up 292 points to finish Wednesday’s trading session at a record-high closing level of 16,167 for a 1.84 percent surge. The S&P 500 (SPY) jumped 1.66 percent to a record-high closing level of 1,810.65.
 
The Nasdaq 100 (QQQ) soared 1.16 percent to finish at 3,509. The Russell 2000 (IWM) jumped 1.33 percent to end the day at 1,133.
 
In other major markets, oil (USO) advanced 0.46 percent to close at $35.03.
 
On London’s ICE Futures Europe Exchange, February futures for Brent crude oil advanced 84 cents (0.77 percent) to $109.28/bbl. (BNO).
 
February gold futures declined $12.10 (0.98 percent) to $1,218.00 per ounce (GLD).
 
Transports were moving at the speed of light on Wednesday, as the Dow Jones Transportation Average (IYT) accelerated 1.16 percent.
 
In Japan, the hedgies got it right. Stocks soared as hedge funds bought-up stocks as well as futures, based on assumptions that the American stock market would rally, regardless of whether or not the FOMC would vote in favor of the taper. Reports were circulating before the Japanese stock market closed (at 2 a.m. EST) that the nation’s hedge funds were anticipating this rise in the United States stock market. The Nikkei 225 Stock Average jumped 2.02 percent to 15,587 (EWJ).
 
Stocks continued to decline in mainland China as money market rates increased. The Shanghai Composite Index declined 0.13 percent to 2,148 (FXI). Hong Kong’s Hang Seng Index advanced 0.32 percent to end the day at 23,143 (EWH).
 
In Europe, stocks made significant gains after the Ifo Institute reported that its Business Climate Index for Germany rose to 109.5 from November’s 109.3.
 
The Euro STOXX 50 Index finished Wednesday’s session with a 1.13 percent jump to 2,975 – remaining below its 50-day moving average of 3,023. Its Relative Strength Index is 46.35 (FEZ).
 
Technical indicators revealed that the S&P 500 climbed further above its 50-day moving average of 1,768 after jumping 1.66 percent to finish Wednesday’s session at a record-high closing level of 1,810.65. Its Relative Strength Index soared 48.74 to 60.48. The MACD has now assumed an upward trajectory, which would suggest that the S&P could continue its advance during the immediate future.
 
On Wednesday, all sectors finished solidly in positive territory, with the technology sector alone in failing to advance by more than one percent.
 
Consumer Discretionary (XLY):  +1.48%
 
Technology:  (XLK):  +0.78%
 
Industrials (XLI):  +1.67%
 
Materials: (XLB):  +1.21%
 
Energy (XLE):  +1.51%
 
Financials: (XLF):  +2.32%
 
Utilities (XLU):  +1.33%
 
Health Care: (XLV):  +2.48%
 
Consumer Staples (XLP):  +1.66%
 
Bottom line:  Investors were relieved to see the taper anxiety cured, by welcoming the Dectaper with new, record-high closing levels for the S&P 500 as well as the Dow, while proving – once again – that the market loves certainty.
 
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