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CLOSING WRAP-UP, May 3
By Jody Osborne, Optionetics.com
5/3/2005 5:15 PM EST

http://optionetics.com/articles/article_full.asp?idNo=12372

Quiet session turns to volatile session following FOMC statement. Even so, the Dow ($INDU) ended the day at 10,256.95, a gain of just 5.25 points. The S&P 500 ($SPX) tacked on 4.42 points to 1,933.07. The Nasdaq ($COMPQ) was unable to regain a positive position, losing but 0.99 points to 1,161.17. Volume was moderate with the NYSE trading 1.67 billion shares and the Naz turning over 1.86 billion shares. Market breadth was flat on both the Big Board and Naz.

Ahead of the Fed statement, stocks saw little movement, even after a getting a better than expected job cuts announcement report. The Challenger report showed a decline of 33 percent to 57,861 in April. This is the lowest level for job cuts since November 2000. In other economic news, factory orders rose against estimates for a decline, but when defense orders are taken out, there was a rather steep fall in orders.

Earnings news was also a part of the session early on, with Tyco (TYC) seeing its shares fall 6.74 percent to $28.65. However, this was well off its intraday low which came on the heels of a disappointing outlook from the conglomerate. King Pharmaceuticals (KG) saw its shares rise more than six percent after raising its guidance for first quarter earnings.

Of course, the big story today was the FOMC meeting and statement. The Fed did raise the Fed funds target rate by 25-basis points to 3.0 percent Tuesday, as expected. However, the committee left its “measured” statement in, easing fears of more aggressive rate hikes in the future. In fact, the Fed hinted that slow growth was more of a concern at the moment than inflation. Nonetheless, the Fed still sees the current rate as accommodative, leaving room for further hikes in the future.

Oil prices fell sharply Tuesday, providing some optimism about fuel costs. June crude gave up a $1.42 to close at $49.50 a barrel after hitting a low at $49.30. This sent oil below support and analysts feel that more declines could be in store for crude in the near future. The hope is that a decline in unleaded gasoline prices will lead to lower prices at the pump. There are worries that high fuel prices are taking a toll on consumer spending.

Though today’s Fed meeting was a major event this week, there are plenty of other economic reports due out that could impact trading. Of course, the key report is set for Friday when the employment data is due out. The flurry of retail sales data on Thursday will also have an impact, as will the crude inventory report on Wednesday.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site