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Waiting for word from Bernanke, stocks higher

Jun. 18, 2013 @ 09:15 PM

NEW YORK -- It's all about the Fed. Still.

U.S. stocks moved higher Tuesday, helped by news of a pickup in home building and low inflation. But the Federal Reserve loomed large, with investors trying to guess what the central bank will say Wednesday about how long it plans to keep stimulus programs in place. For many, the market was in a holding pattern as investors waited for Wednesday's announcement.

The market's gains were steady and broad. The Standard & Poor's 500 index rose 12.77 points, or 0.8 percent, to 1,651.81. All 10 of its sectors rose, led by industrial and telecommunications companies. The Russell 2000, an index of smaller companies, closed at a record high but fell just shy of the 1,000-point milestone.

Tuesday's wait-and-see vibe came from a familiar template. The Fed has had an outsized effect on the stock market in recent weeks, with the major indexes getting yanked back and forth as investors try to guess how long the central bank will keep supporting the U.S. economy.

Some investors say it's troubling that the market is relying more on the central bank for direction than economic fundamentals. The latest turning point was May 22, when Fed Chairman Ben Bernanke startled markets by announcing that the central bank could soon pull back on its bond-buying program if the economy improves.

"Here we are again," said Gregg Fisher, founder and chief investment officer of Gerstein Fisher, a financial advisory firm in New York. "We don't know what the actions will be. We're all trying to figure that out."

The Fed's role in the market has swelled since the 2008 financial crisis. The central bank, which is best known for helping set interest rates, has taken an increasingly bigger role in trying to amp up the economy. Its bond-buying program is meant to keep interest rates low, which can encourage borrowing and drive investors into the stock market. The Fed's purchases have swollen its portfolio to $3.4 trillion, a four-fold increase since before the crisis.

The Dow Jones industrial average rose 138.38 points, or 0.9 percent, to 15,318.23. The Nasdaq composite index rose 30.05 points, or 0.9 percent, to 3,482.18.

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