By David Russell, reporter at OptionMonster
NEW YORK -- Traders went into Wednesday positive on the global economy. Then the Federal Reserve kept easy money in place, and the bulls ran rampant.
Gains were initially limited after the Fed announcement, but then money poured into stocks that benefit from a weak dollar and low interest rates -- gold and silver miners, homebuilders, and emerging markets.
Fed officials will continue to buy $85 billion of bonds a month because higher interest rates "could slow the pace of improvement in the economy and labor market," according to the central bank's statement. Bond yields had climbed sharply in recent months on concern that the Fed would "taper" purchases, and most economists expected a reduction to about $70 billion going into Wednesday's meeting.But more is going on than simple money printing. Economic reports from around the world have beaten forecasts since the summer, suggesting that both Chinese and European growth were accelerating on their own. ResearchLab has flagged this trend on several occasions, detecting the flow of capital into ocean-shipping companies, Chinese stocks, and steelmakers over the last month. optionMONSTER also pointed to price action in the euro and Australian dollar as a bullish indicator earlier this month. Two metal stocks in particular stood out early Wednesday, long before the Fed gave a green light to target the sector. Cliffs Natural Resources (CLF) saw early buyers in its November 28 calls for 60 cents, followed minutes later by the November 25 calls in U.S. Steel (X) for 26 cents. The Cliffs contracts ended the session up to 70 cents, while the U.S. Steel calls fetched 33 cents. Later in the day, there was also heavy bullish activity in related companies including Vale (VALE) , BHP Billiton (BHP) , and Rio Tinto (RIO) . Russell has no positions in any of the stocks mentioned in this article.
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