Dow Watch: Strike That

(At 3:47 p.m. EDT)

Did I say plenty of green before? Scratch that. Following the announcement of the Federal Reserve's rate decision, the Dow has fallen all the way into negative territory, lately down almost 20 points.

Boeing (BA Quote) continues to be the biggest laggard, down 5.9%, but it has now been joined in the red by American Express (AXP Quote), United Technologies (UTX Quote) and McDonald's (MCD Quote), among others.

So exactly what about the Fed's announcement weighed so heavily on the blue chip average? It had nothing to do with the fed funds rate, as the central bank left the target range unchanged, but instead with the fact that the Fed did not increase its bond-purchase program.

Robert Pavlik, chief market strategist with Banyan Partners, said that if the Fed wants to keep interest rates low and the recovery moving along, the central bank will have to increase asset purchases, especially if the speed of the economy doesn't pick up.

"You're going to need lower interest rates in order to keep funding business expansion and the momentum in housing," Pavlik said. "Without purchasing these things, rates will move up, fear of inflation will creep in, and the Fed will continue to pump out new issues to fund the stimulus packages."

Despite the turnaround, the Dow is off the lowest levels and was fighting back towards the unchanged mark. Still, if the index finishes lower it will be a fourth consecutive losing session, the second one in June. (At 11:01 a.m. EDT)

Thank you, durable goods orders.

A survey of the Dow's 30 components shows a lot of green today, a welcome sight for bulls who have endured three straight days of losses. Credit for the industrial average's 1% rise goes to the May durable goods report, which showed a 1.8% increase over April, surprising economists who had expected a decline.

Combined with April's increase, the latest durable goods report suggests that manufacturing activity may have hit its nadir, or so the bulls are hoping. Still, increased manufacturing doesn't help the tattered labor and housing markets.

Speaking of housing, it appears the strong industrial news from the durable goods report has overshadowed a dour sales figure for new homes in May. The Commerce Department said new-home sales unexpectedly fell 0.6% in May to a seasonally adjusted annual rate of 342,000, down from a revised rate of 344,000 the month prior. Sales were down nearly 33% from May last year.

If manufacturing activity is suggesting a recovery, housing's still in the ICU.

For now, though, the Dow is up nearly 100 points, with plenty of help from industrial and manufacturing names. Caterpillar (CAT Quote), General Electric (GE Quote), and 3M (MMM Quote) were all higher by 2% or more.

Alcoa (AA Quote), though, was the strongest component, climbing 5.2% as precious metals were on the rise. Gold, silver, copper, aluminum, nickel and zinc prices were all on the rise Wednesday.

Stock gains were also fueled by the Organization for Economic Cooperation and Development decision to increase its forecast for expansion in 2010. The OECD said its 30 industrialized member countries will grow 0.7% next year after shrinking 4.1% in 2009, according to Bloomberg. In March, the OECD forecast a 2010 contraction of 0.1%.