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Stocks closed sharply higher today with the Federal Reserve appearing to have given investors something to be thankful for: a strong hint that its 16-month campaign of raising interest rates may finally be nearing an end. The National Retail Federation also revised its sales forecast to project growth of 6%, up from its prediction of 5% two months ago.

Over the past three weeks, the major averages have carved out notable new highs. However, for the longer-term investor, there’s a real question as to where you set the reference point. It is worth noting that the sector-specific backdrop is favorable as this rally is supported by both financials and technology. The markets remain near-term overbought and therefore, the near-term risk/reward on new positions isn’t great at current levels. A longer-term investor would do better to be long in this market.

Today the Dow Jones Industrial Average closed up 51.15 points at 10,871.43, the Standard & Poor’s 500 Index closed up 6.38 points at 1,261.23, and the Nasdaq Composite Index ended 11.89 points higher at 2,253.56. Once again the S&P and the Nasdaq marked fresh four-and-a-half year highs.

Market breath was positive. On the New York Stock Exchange, there were 19 rising shares for every 13 falling in a volume of over 1.67 billion shares. On the Nasdaq market, there were more than 1.88 billion shares traded with 16 shares gaining for every 13 losers.

Amongst the gainers, Micron closed 3.3% higher at $14.67 on news about upgradation by Merrill Lynch. Intel ended up 3.5% higher at $26.15 as a reaction to the flash memory joint venture with micron. Shares of the Altria Group rose 2.1% to $73.12 and Wal-Mart Stores increased 1.1% to $50.20. H.J. Heinz Co. rose 1.7% to $35.68, after reporting a net income of $203.8 million, for the second quarter. Stock of Deere & Co. rose almost 7% to $67.40, despite weaker fourth-quarter profit and sales.

In its continuing woes, General Motors closed down $0.31 or 1% to $23.27, after announcing the restructuring plans. Cooper Companies also closed down $13.32 or over 20% to $51.50, after warning that fiscal fourth-quarter revenue and earnings would miss forecasts due to weak sales. Another big loser was Calpine Corp that dropped almost 21% to $1.39, after a Delaware judge ruled that it cannot use $395 million from the sale this year of oil and gas fields to buy natural gas to run its power plants.

All that glitters appears to be Gold. Gold futures continued their bull run bringing the front-month contract to within $4 of the key $500 an ounce level, on continued robust physical demand and fears of inflation. The precious-metals rally is being driven by institutional and hedge-fund buying.

U.S. crude oil for January delivery closed at $58.84 a barrel, up $1.14 from yesterday’s close.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter