8:50am (EST)
The market got off to a strong start on Wednesday but weakened as we were doing our midday update following the release of the Fed’s policy statement. To no one’s surprise, they kept interest rates at 0.00%-0.25% and said they remain ready to employ their war chest to promote a stronger economic recovery.
As far as the numbers go, let’s take a look.
For the year, the Fed sees economic growth coming in at 1.6%-1.7%, down from an earlier range of 2.7%-2.9%. For 2012, the boys said we could expect growth of 2.5%-2.9% which was lowered from a range of 3.3%-3.7%. Additionally, the Fed sees the unemployment rate at 9%-9.1% this year and 8.5%-8.7% for next year.
Of course, the bulls were looking for a little “QE3” love from Fed Chairman Ben Bernanke and got some in a Q&A session after his comments on the economy. Big Ben said that under “the right conditions” the Fed would consider the purchase of mortgage-backed securities.
Although the market didn’t make it back to session highs, it was good to see the bulls hold camp and reclaim resistance.
The Dow gained 178 points, or 1.5%, to finish at 11,836. The blue-chips were never in danger of testing support at 11,600 as the index traded to a high of 11,876. Resistance is at 12,000 which could be challenged today.
The S&P 500 added 20 points, or 1.6%, to settle at 1,238. The index made a high of 1,242 as the bulls look to clear 1,250 again. Support is still at 1,225 which got “stretched” on Tuesday then 1,200.
The Nasdaq added 33 points, or 1.3%, and ended at 2,639. Tech peaked at 2,648 and nearly made it back to 2,650 which is where we were hoping to close. We should get there today after Qualcomm (QCOM, $52.18, up $2.04) knocked the cover off the ball with its earnings report after the bell last night.
The company continues to benefit from a booming smartphone market and said profits came in at $1.06 billion, or $0.62 a share, up over 20% from last year’s net of $865 million, or $0.53 a share. Revenue jumped nearly 40% to $4.12 billion.
Excluding write-offs, Qualcomm actually earned $0.80 a share, which was higher than the $0.78 a share, on revenue of $4 billion, Wall Street had been penciled-in.
Shares were up $5 to over $57 in after-hours trading and those gains appear to be holding this morning as we head to press. We may send out a Trade Alert because we have an open Qualcomm recommendation that should do well at the open. We closed out 2 more winning trades yesterday to bring our winning streak to 25-straight CLOSED trades since late September and we could close number 26 today. If you are not a subscriber, you can request our 2011 track record which is on the website.
Futures look like this: Dow (+109), S&P 500 (+13), Nasdaq 100 (+12). Subscribers, check the Members Area for the latest updates and stay locked-and-loaded in case we add new trades or take profits in others.
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