Stock Market Today Reflects Strong Reliance on FOMC Meeting

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The stock market today opened on an optimistic note as worries abate about the Fed indicating an end to quantitative easing after this week's Federal Open Market Committee (FOMC) meeting.

Shortly after the opening bell, the Dow Jones Industrial Average surged 172.02, or 1.14%, at 15,242.20. The Standard & Poor's 500 Index soared 16.43, or 1.01%, at 1,643.16. The Nasdaq jumped 40.11, or 1.17%, at 3,463.67.

The stock market fell sharply Friday, logging its third weekly loss in the past four weeks. Investors were jittery ahead of this week's Fed meeting. The Dow experienced its fourth straight triple-digit move, ending a volatile week down 1.2%.

The S&P, one day after enjoying its best session since Jan. 2, gave back 9.63 points, or 0.6%. For the week, the S&P retreated 1% and the Nasdaq lost 21.81, or 0.6%.

"Markets are more fragile now, whereas they had been bulletproof by the bulls for the last six months," Joe Saluzzi, co-manager of trading at Themis Trading told CNBC. "Unfortunately, the only thing that everyone cares about is what the Fed's doing and that's troubling, when we should be looking at economic data, fundamentals and corporate profits...There are still warning signs being flagged right now and people are getting concerned.

Monday, investors appeared to be betting the Fed will stand pat.

Biggest News in the Stock Market Today

  • Netflix Inc. (Nasdaq: NFLX) shares were up nearly 6% after announcing a deal with DreamWorks. The animation company will create original shows for Netflix based on DreamWorks characters like Shrek and Kung Fu Panda.
  • The Boeing Company (NYSE: BA) shares rose more than 1% after CEO James McNerney told CNBC he is "highly confident" the battery problems with its 787 Dreamliners have been fixed.
  • Facebook Inc. (Nasdaq:FB) shares gained some 2% after sending out media invitations for a Thursday event in which it will reveal its next "big idea." Speculation is the social media giant may unveil an RSS-reader.
  • Johnson & Johnson (NYSE: JNJ) shares jumped 1.61% after announcing it will buy Aragon Pharmaceuticals, a private company running mid-stage clinical trials for a prostate cancer drug, for $650 million in cash.

The Stock Market Week Ahead

The earnings calendar is light this week, but there are some notable names on tap to report...

  • FedEx Corp (NYSE: FDX) reports fiscal Q4 earnings Wednesday. The world's largest international air shipping company, in the midst of a multi-year restructuring plan in response to the ailing global economy, is expected to post a 4% increase in revenue, while income is projected to tick down 1%.
  • Oracle Corp. (Nasdaq: ORCL), attempting to transform into a Web-based software provider and cloud computing supplier, reports earnings Thursday. Expectations are for Oracle to post a 7% rise in EPS and 2% increase in revenue.
  • Darden Restaurants Inc. (NYSE: DRI) reports Q4 earnings Friday. The world's largest full-service restaurant company, which employs more than 185,000 people, is expected to report earnings of $1.04 down from $1.15 in the same quarter a year ago.

The sleepy initial public offering market gets some action this week with the IPO of inflight Wi-Fi provider Gogo Inc.

Also expected to make debuts are biopharmaceutical firms PTC Therapeutics Inc. and Regado Biosciences Inc.

But the week's main event is the FOMC policy meeting.

Investors have been on edge ever since Fed Chief Ben Bernanke's comments suggested a tapering of the Fed's $85 billion a month bond purchase program may be on the way.

More than $2.5 trillion has been erased from the value of global equities since May 22 when Bernanke said the Fed could scale back stimulus efforts should employment show "sustainable improvement."

Bernanke is expected to calm markets when the central bank's statement is released Wednesday.

"The economy is not where it needs to be for the Fed to cut off stimulus, with inflation coming in under their target and with the jobs report still not being really strong, it still leaves room for the Fed to maintain its policies, Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc. told MarketWatch.

As for the decision to start raising interest rates, which the Fed has linked to a 6.5% unemployment rate, that too looks far off. The unemployment level inched up in June to 7.6% and economists say near zero rates should be safe for at least two more years.

The last time the Fed raised rates after a string of easing measures was June 2004. The fed fund rate was raised to 1.25% from 1%, and the S&P fell 7% over the next six weeks. The Fed hiked the rate four more times that year to 2.25%. But by that time, stocks had rallied 14% from their August lows.

The Fed was reminded to move prudently when the International Monetary Fund trimmed its U.S. growth outlook for 2014 to 2.7% from the 3% projected in April.

Policymakers maintain future Fed decisions will be driven by economic data.

Lately, manufacturing, an economic driver, has been a drag on the labor markets.

But Monday's fresh look at U.S. factory activity was robust. The Empire State Manufacturing Index rose to 7.8 in June, much stronger than expected, and up sharply from -1.4 in May. A reading above zero indicates expansion.

Thursday's Federal Reserve Bank of Philadelphia's Business Outlook Survey will shed more light on economic activity.

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