Markets got an initial upward push after a German court allowed the nation to ratify the Euro region’s rescue fund. However, cautiousness about the Fed’s upcoming meeting kept gains in check. The blue-chip and S&P 500 indexes touched new multi-year highs during the initial hour. Eventually, benchmarks chose to end just a tad higher as apprehensions about further monetary measures dominated sentiment. Separately, the long-awaited iPhone 5 was finally launched by tech-bellwether Apple.
The Dow Jones Industrial Average (DJI) edged up 0.1% and ended the day at 13,333.35. The Standard & Poor 500 (S&P 500) added a paltry 3 points or 0.2% to finish Wednesday’s trading session at 1,436.56. The tech-laden Nasdaq Composite Index gained 0.3% to close at 3,114.31. The fear-gauge CBOE Volatility Index (VIX) dropped 3.7% and settled at 15.80. Consolidated volumes on the New York Stock Exchange, the American Stock Exchange and Nasdaq were roughly 6.15 billion shares, lower than last year's daily average of 7.84 billion shares. For every two stocks that gained on the NYSE, one stock moved in the other direction.
Trading action on Tuesday was largely dependent on investors’ apprehension over the outcome of two key events. Germany's Constitutional Court was to announce if it approved of the European Stability Mechanism on Wednesday and US policy makers were slated to reveal the proceedings of their two day meet a day later. The German court did allow the nation to ratify a €500 billion permanent rescue fund, termed as the European Stability Mechanism and the so-called Fiscal Pact. However, the parliament was given veto power if the bailout fund’s size increases. The German court stated: “No provision of this treaty may be interpreted in a way that establishes higher payment obligations for the Federal Republic of Germany without the agreement of the German representative”.
The development sparked off the initial cheer and helped the markets clock up gains. Investors were happy to note that the first key event of this week, on which they had their eyes fixed, had taken a positive turn. The development was almost in tune with their expectations and they now patiently await for the second event to be favorable as well – Fed approving the third round of quantitative easing (QE3).
The policy makers two-day meet will come to a close on Thursday, following which investors would be anxiously waiting for what the policy makers have to announce. The US Federal Reserve is expected to keep interest rates low. But the Street will anxiously await any announcement regarding QE3. Benchmarks have been rallying higher over the past few days on hopes that the US central bank will finally announce additional economic measures. A report by Reuters noted that economists predict there is a 65% chance that policy makers will announce QE3. Investors preferred to adopt a cautious stance, which restricted benchmarks’ gains yesterday.
Separately, Apple Inc. (NASDAQ:AAPL) finally unveiled the long-awaited iPhone 5. The latest launch is not just great news for smartphone lovers, but will help Apple strengthen its position in the smartphone market. iPhones have played a significant role in Apple’s success story and iPhone 5 is expected to do the same. On the day when the device was unveiled, shares of Apple jumped by a decent 1.4%.
Among other technology shares, Yahoo! Inc. (NASDAQ:YHOO), SINA Corp (NASDAQ:SINA), Cisco Systems, Inc. (NASDAQ:CSCO), Juniper Networks, Inc. (NYSE:JNPR), Ingram Micro Inc. (NYSE:IM), Silicon Graphics International Corp (NASDAQ:SGI), Computer Sciences Corporation (NYSE:CSC) (0.5%) and Hewlett-Packard Company (NYSE:HPQ) gained 1.6%, 1.2%, 0.2%, 4.3%, 1.1%, 0.8%, 0.5% and 0.2%, respectively.