US Stocks Rally ahead of Federal Reserve Statement

Traders work on the floor of the New York Stock Exchange before the Closing Bell in New York, New York, USA, on 08 August 2011. Photo by EPA/BGNES

US stocks made a come back on Tuesday ahead of the keenly expected Federal Reserve's latest statement on monetary policy.

The Dow Jones industrial average went up 217 points, the S&P 500 ticked up 28 points, the Nasdaq rose 74 points, but the VIX, which is the main culprit for stirring fear on Wall Street, tumbled 14%.

Investors are looking forward to the central bank's announcement, expecting indications that the Fed will take steps to stabilize markets, and revitalize the slowing economic recovery to avoid a double-dip recession, analysts told CNN.

"Everyone's looking to them at this point for the exact language they use to describe the economy, and then we have to decode it," said Lee Smith, vice president of Cozad Asset Management.

"I think they'll have to recognize that we're in a soft patch, but they'll probably say it's not a recession."

Experts have warned that it is still to be seen whether Tuesday's bounce is just a technical blip, or part of an actual turnaround.

"I've still got my helmet on," Smith said. "The sell-off yesterday was overdone, so I'm starting to dip one foot back in the market -- but confidence is so weak right now, I don't have both feet back in yet."

In the meantime investors are hiding under gold's shelter as its futures for December delivery gained USD 21.80 to USD 1,735 an ounce. Earlier, gold prices hit a record intraday high of USD1,782.50 an ounce.

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