MarketView for September 11

Summary

Tuesday saw the Dow Jones Industrial Average end the day at its highest point in nearly five years in a lightly traded session as investors anxiously await key decisions in Germany and the United States that could give markets a further lift upwards. Energy, industrial and financial firms led the advance. Contributing to gains by the Dow industrials, shares of IBM ended the day up 1.15 percent, closing at to $203.27. Caterpillar was up 1.72 percent to end the day at $88.60.

Equities have rallied in recent weeks on hopes for monetary stimulus by central banks. The Federal Reserve could announce Thursday additional steps to support low interest rates. On Wednesday, Germany's highest court will decide on the legality of the euro zone's new bailout fund.

The Nasdaq erased most of its gains in the afternoon as shares of Apple fell in heavy volume. The stock ended the day down 0.32 percent to close at $660.59.

Right now the feeling on the Street is that there is a 60 percent chance the Fed will announce another round of quantitative easing at the end of its two-day meeting. Disappointing August jobs data released last Friday bolstered that view.

Given that the markets have already absorbed a considerable amount of so called good news, the concern is that it has therefore been priced in, exposing the equity markets to a decline should the Fed disappoint.

Expectations Germany's Constitutional Court would approve the European Stability Mechanism -- the euro zone's new bailout fund raised sentiment, although the consensus is that the court will impose tough conditions limiting Berlin's flexibility on future rescues.

Another event which could cause turbulence in markets is a Dutch general election on Wednesday, with voters divided between bailouts for troubled euro zone economies and austerity measures.

Shares of Bank of America closed up 5.24 percent to $9.03, leading bank stocks higher.

Knight Capital Group Inc (KCG.N) said it has hired IBM to look into the August 1 trading glitch that cost the trading firm $440. The stock rose 1.12 percent.

Zynga’s chief marketing officer resigned on Monday, becoming the latest senior executive to depart the struggling social games company behind popular Facebook games such as Farmville. Zynga shares ended the day down 1.06 percent to close at $2.79.

Volume was light, with about 5.91 billion changing hands on the three major equity exchanges, a number that was below last year's daily average of 7.84 billion shares.