MARKETS RALLY AS THE FED MEETS: Here's What You Need To Know

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Photo: bpende on Flickr

Markets enjoyed a nice rally, led by strength in financials and a rumour that Angela Merkel would allow the EFSF to buy distressed sovereign debt.But first, the scoreboard:

Dow: 12,837.3, +96
Nasdaq: 2,929.8, +34
S&P 500: 1,358.0, +13

Here’s what you need to know.

  • JPMorgan’s chief executive Jamie Dimon returned to Washington for a second hearing, this time before the House Financial Services Committee about the company’s $2 billion trading. Unlike the Senate hearing, Dimon was hit with a series of sharp questions from both sides of the aisle over derivative trading, the company’s risk models, and if other banks would have failed had they undertaken a similar trade.
  • A Greek coalition government is expected to be formed by midday tomorrow, missing earlier expectations for that to occur today. PASOK leader Evangelos Venizelos told reporters today that his party would “sincerely” support the coalition, but that left-wing party Syriza would not participate in the negotiations. His comments were supported hours later by statements from Democratic Left leader Fotis Kouvelis, who said his party would back the coalition. The coalition is expected to be made up New Democracy, which secured a majority of votes in Sunday’s elections, as well as PASOK and Democratic Left. 
  • The euro shot higher this afternoon after EU leaders pared back an amendment that would have forced companies to rotate credit agencies frequently. Instead, lawmakers say they will only require structured debt products to re-rate every five years. Companies that use two or more ratings agencies will receive a partial exemption. The news sent the euro as high as $1.2706, before retreating. 
  • rumours hit midday that Angela Merkel would allow the European Financial Stability Facility purchase as much as €750 billion in debt-laden government bonds to temper borrowing costs in Italy and Spain. The Guardian’s report was shot down by Sebastien Galy, senior currency strategist for Societe Generale, who told Business Insider in an interview that a “German government official says there were no discussions at G20 meeting about any plans to use EU’s rescue funds to buy the bonds of the crisis-hit members.”
  • The Fed began a two day meeting today, with the Federal Open Markets Committee scheduled to release a key policy decision tomorrow. While Wall Street expects the central bank to leave headline interest rates unchanged at 0.25 per cent, a number of analysts see the Fed offering some form of stimulus or easing. Click here to see what the top economists expect the authority to do >
  • J.C. Penney shares collapsed eight per cent today after a surprise announcement by the company that president Michael Francis would resign yesterday. Chief Executive Ron Johnson will assume his responsibilities. But the news shook investors, with retail guru Walter Loeb saying Francis was only “the ‘fall guy’ in this action.” In a post on Forbes, Loeb says Johnson “was also to blame for the lack of business since he clearly believed in lifestyle merchandising.”
  • Microsoft formally unveiled its first tablet offering yesterday, circumventing its traditional stance of providing the software to hardware manufacturers. The Surface, which will go on sale later this year, runs Windows 8, has a 10.6 inch screen and a kickstand. The announcement sent Microsoft shares up nearly three per cent. Here are the first photos of the tablet >
  • Shipping giant FedEx beat earnings expectations this morning, when it reported it earned $1.99 per share in the fourth quarter as revenue improved four per cent to $11 billion. However, the company missed first quarter guidance estimates, projecting results between $1.45 and $1.60 per share, below Wall Street consensus for $1.70. Margins contracted within the company’s largest revenue driver, FedEx Express, as package volumes declined.
  • The number of new job openings in the U.S. fell more than eight per cent month-on-month to 3.416 million in April, new data out of the Bureau of labour Statistics shows. Economists had expected the number to fall to 3.685 million from 3.741 million a month earlier.

SEE ALSO: Traders Are Betting That These 14 Banks Will Default >

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