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Stocks surge more than 1% ahead of Fed meeting

June 17, 2013|By Andrew Tangel
  • Fed Chairman Ben S. Bernanke speaks during a congressional hearing in Washington.
Fed Chairman Ben S. Bernanke speaks during a congressional hearing in Washington. (Andrew Harrer / Bloomberg )

NEW YORK -- The main event for Wall Street this week may not yield any surprises -- or so investors seem to think.

Stocks surged more than 1% early Monday ahead of a key Federal Reserve meeting, a sign investors do not expect the central bank to announce any immediate changes to its easy-money stimulus programs.

The Dow Jones industrial average jumped 179.18 points, or 1.19%, to 15,249.36 shortly after the opening bell.

The broader Standard & Poor's 500 index rose 17.54 points, or 1.08%, to 1,644.27. The tech-focused Nasdaq was up 37.10, or 1.08%, to 3,460.66.

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After the Fed's after the two-day meeting, Chairman Ben Bernanke's Wednesday news conference may offer hints about the Fed's next moves.

However, investors don't expect any major announcements, said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.

“The markets aren’t expecting a whole lot of anything,” Frederick said. “There won’t be a whole lot of big surprises."

Many on Wall Street expect that the Fed may begin scaling back its stimulus in the fall.

The Fed has been pumping $85 billion a month into the economy by buying bonds, part of an unprecedented effort to stimulate growth by making borrowing easier. By pushing interest rates lower, the Fed has made riskier investments such as stocks more attractive.

And stocks have rallied: The Dow is up 16% for the year.

But investors have grown increasingly jittery in recent weeks amid growing speculation concerning how soon the Fed will begin to scale back its stimulus program.

Stock and bond markets have become more volatile as investors reposition their portfolios for an eventual winding-down of the Fed's stimulus, known as quantitative easing, Frederick said. 

“The market is trying to figure out what building in a reduction of bond-buying looks like,” Frederick said. “There’s a bit of tug of war going on, and that’s why we have this volatility."

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