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Investors anticipated a positive outcome to the Federal Reserve’s two-day policy meeting, lifting the major indices higher on Tuesday. Benchmarks finished in the green for the second consecutive day.  A couple of domestic reports were also released yesterday. Housing starts increased in May but missed the Street’s expectations. Additionally, the Consumer Price Index increased in May. All ten sectors of the S&P 500 industry chalked up gains with industrials leading the pack.

The Dow Jones Industrial Average (DJI) gained 0.9% to close the day at 15,318.23. The S&P 500 added 0.8% to finish yesterday’s trading session at 1,651.81. The tech-laden Nasdaq Composite Index rose 0.9% to end at 3,482.18. The fear-gauge CBOE Volatility Index (VIX) declined 1.1% to settle at 16.61. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.43 billion shares, considerably lower than 2013’s average of 6.36 billion shares. Advancing stocks outnumbered the decliners. For the 66% that advanced, only 32% declined.

The Federal Reserve’s two-day policy meeting, kicked off on Tuesday. The future of the bond buying program will be the focal point of discussions. The $85 billion bond buying program was implemented to boost borrowing, spending and investing to bring the country back on the road to recovery. Quantitative easing has acted as the primal catalyst for the economy, lifting benchmarks higher this year. The S&P 500 is nearly 1% below its highest level.

The Fed is expected to release its latest policy statement on Wednesday. Despite robust economic reports on the home front indicating improvements in the health of the economy investors are expecting that the Fed will not change its program. The Central Bank is also likely to give an update on economic projections for the 2013-2015 period. The outcome of the two-day policy meeting will probably decide the trajectory of major indices going forward.       

On the domestic front, the U.S. Census Bureau and the Department of Housing and Urban Development jointly announced building permits and housing starts numbers. According to the report, privately owned housing starts came in at 914,000, higher than the previous month’s revised figure of 856,000. This was below the consensus estimate of 950,000. Building permits declined to 974,000 in the month of May from April’s revised figure of 1,005,000. This is marginally above the consensus estimate of 973,000.

Housing stocks gained after housing starts numbers. The SPDR S&P Homebuilders (XHB) gained 0.9%. Stocks such as Meritage Homes Corp (NYSE:MTH), PulteGroup, Inc. (NYSE:PHM), The Ryland Group, Inc. (NYSE:RYL), D.R. Horton, Inc. (NYSE:DHI) and Toll Brothers Inc (NYSE:TOL) gained 1.1%, 0.3%, 0.9%, 0.5% and 1.1%, respectively.

Meanwhile, the Consumer Price Index for All Urban Consumers (CPI-U) added 0.1% in May, missing the consensus estimate of an increase of 0.2%. CPI entered positive territory after languishing in the negative zone for the two consecutive months. Increase in CPI was boosted by shelter components. The shelter index gained 0.3% in May.

The industrial sector was the biggest gainer among the S&P 500 industry groups and the Industrial Select Sector SPDR (XLI) gained 1.2%. Stocks such as United Parcel Service, Inc. (NYSE:UPS), 3M Co (NYSE:MMM), Deere & Company (NYSE:DE) United Technologies Corporation (NYSE:UTX) and General Electric Company (NYSE:GE) increased 1.0%, 1.0%, 0.2%, 1.3% and 2.4%, respectively.
 

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