MarketView for June 19

They say hope springs eternal and there certainly was evidence of that on Wall Street today as the major equity indexes moved sharply higher on a hope and a dream that the Fed would offer up a present on Wednesday afternoon in the way of some additional stimulus activity to combat a struggling economic environment and the euro zone debt crisis.

On Tuesday, the S&P 500 index closed above its 50-day moving average of 1,346.90 for the first time in seven weeks. But the sharp gains leave the market vulnerable if the outcome of Wednesday's Fed meeting doesn't meet market expectations.

Growth-related stocks led the rally, with the S&P materials sector index up 2 percent and the financial sector index up 1.7 percent. U.S. Steel was up 9.5 percent to close at $20.15. Bank of America added 4.5 percent, closing at $8.11.

At the same time the Street kept a wary eye on developments in Europe. A sharp decline in German business sentiment, alongside stubbornly high Spanish bond yields, raised expectations for stimulus from European policymakers as well.

British media reported that German Chancellor Angela Merkel was poised to use Europe's dual bailout funds, the European Financial Stability Facility and the European Stability Mechanism, to buy debt of countries like Italy and Spain. At the same time, a German government official was quoted by Reuters as saying that there was no discussion at the G20 summit in Mexico about using Europe's rescue funds to buy the bonds of stricken members of the euro zone.

On Tuesday, the Federal Open Market Committee began the first day of a two-day meeting on interest-rate policy. The meeting got under way with expectations increasing that the Fed may extend its "Operation Twist" program, its effort to drive down long-term borrowing costs.

Spain's government bond yields eased slightly after it raised 3 billion euros at a short-term debt sale, with the higher yields enticing investors. However, with its 10-year bond yield above 7 percent, investors worry how long the euro zone's fourth-largest economy can survive without foreign help.

Oracle ended the day up 3.1 percent to close at $27.96 a day after it reported stronger-than-expected quarterly earnings, releasing the results three days ahead of schedule after news of the pending departure of a senior sales executive fueled concerns that business was stagnating.

Walgreen fell 5.9 percent to $30.09 after the pharmacy chain reported quarterly earnings and said it would buy a 45 percent stake in Alliance Boots for $6.7 billion in a cash-and-stock deal.

FedEx Corp rose 2.8 percent to $91.01 after the package delivery company reported fourth-quarter earnings and provided an outlook for the first quarter and 2013.

Shares of J.C. Penney fell by 8.5 percent to $22.25 a day after its president abruptly left the department store operator following a botched advertising campaign.

Volume was light, with about 6.7 billion shares changing hands on the three major equity exchanges, a number that was well below last year's daily average of 7.84 billion shares.