"The Fed's decision to taper caught many by surprise," observed
Schaeffer's Senior Technical Strategist Ryan Detrick, CMT. "The
thinking was that with the economy still on weak footing -- and
this being Ben Bernanke's last central bank decision as Fed
chairman -- the odds were in favor of pushing the decision to taper
until next year." Nevertheless, the
Dow Jones Industrial Average (DJI)
soared on news of the $10 billion scale-back, and reclaimed the
Continue reading for more on today's market, including
- Find out why The Walt Disney Company's (
) already-successful 2013 could get a
little bit sweeter
- Options activity ran hot on
these three stocks
, two of which were in the headlines today.
is popular with call players, but some of these bets may reflect
hedging activity by skeptics.
- Plus ... housing starts reached a multi-year high, Apple Inc.
) received some upbeat analyst attention, and BlackBerry Ltd (
) attracted a
pre-earnings call seller
Trading Topic of the Week -- Trading Low-Priced Options:
DO buy higher-delta options
. The closer an option's delta is to 1.00 (for a call, or negative
1.00 for a put), the likelier it is that the option will retain
some intrinsic value at expiration. This offers you some
"insurance" against the possibility of a total loss.
Dow Jones Industrial Average (DJI - 16,167.97)
flirted with breakeven for much of the day, but surged following
the Fed's tapering announcement. By the end of the session, the
blue-chip index was up 292.7 points, or 1.8% -- marking a record
closing high. The Dow's 29 advancers were once again led by 3M Co (
) -- which gained 3.4% -- while a 0.3% drop for The Boeing Company
) marked it as the sole decliner.
S&P 500 Index (SPX - 1,810.65)
experienced similar price action, and finished 29.7 points, or
1.7%, higher -- notching an all-time closing high of its own.
Nasdaq Composite (COMP - 4,070.06)
advanced 46.4 points, or 1.2%, for the session.
CBOE Volatility Index (VIX - 13.80)
plummeted after the Fed update, and closed 2.4 points, or 14.9%,
A Trader's Take
"The general consensus was that a decision to taper would bring
with it a massive jolt of volatility, and probably lower prices,"
Detrick noted. "Sure, this is very early, but the initial reaction
has been just the opposite. Volatility has imploded, and the bulls
have taken charge. This is another reminder that following the
crowd can be a dangerous game."
5 Items on Our Radar Today
- The Fed said it will start
tapering its asset-buying program in January
, after nine out of 10 voting members of the Federal Open Market
Committee (FOMC) voiced their approval of the move. The central
bank will pare its monthly purchases of both bonds and
mortgage-backed securities by $5 billion, for a net monthly
reduction of $10 billion.
- The Commerce Department said
surged by a larger-than-expected 22.7% in November to a
seasonally adjusted yearly rate of 1.09 million, marking a near
six-year high. Conversely, building permits fell by 3.1% last
month to an annual pace of 1.01 million.
Apple Inc. (
secured an upward price-target adjustment in pre-market action,
despite the stock's lackluster 2013 advance.
- Call activity surged on
Facebook Inc (FB)
, as one confident speculator upped the bullish ante on the
BlackBerry Ltd (
saw some pre-earnings action in the options pits, which included
a large block of sold-to-open calls.
For a look at today's options movers and commodities
activity, head to page 2.
The Fed's decision to start tapering in January pushed crude
futures higher today, as the January contract added 58 cents, or
0.6%, to close at $97.80 per barrel.
Meanwhile, gold futures finished higher, as well, with
February-dated gold climbing $4.90, or 0.4%, to end at $1,235 an