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Stocks Surge On No-Surprise Rate Hike; The Message Behind The Pop

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U.S. stock indexes nailed down their best gain in two weeks Wednesday, as the Federal Reserve cranked up interest rates a quarter-percent.

The Nasdaq rose 0.7%, its best gain since March 1. The S&P 500 and the Dow Jones industrial average advanced 0.8% and 0.5% respectively. The small-cap Russell 2000 led with a 1.7% gain. Volume in the stock market today was up on both major exchanges.

The Fed's interest-rate hike stirred bullish action, even though the rate hike was no surprise. Five minutes before the Fed's announcement, the Nasdaq was up 0.3%; the Dow, 0.2%; the S&P 500, 0.4%; and the Russell 2000, 0.8%. After word of the hike, the day's gains more than doubled.

Among IBD's 197 industry groups, the session's top gainers were gold miners, steel and oil.

The gold mining group is a market laggard. Most of the gold stocks are far below their July-August highs. Gold rose about 1% Wednesday. The exchange traded funds invested in gold are 11% off their highs.

Oil stock groups are generally middle of the pack in the ratings, but they benefited from a 2% pop in light sweet crude. Dow stocks Chevron (CVX) and Exxon Mobil (XOM) rose more than 1% each. Chevron is forming a flat base with a 119.10 buy point; Exxon is 14% off its 52-week high and still below its 50-day and 200-day moving average line.

The steel-producers group was No. 10 among 197 industry groups, going into Wednesday's session. The group is about 9% off its high.

The day's losers included retail auto parts and retail department stores. Both were already beaten down.

Leaders were generally quiet. Chip stocks, which constitute the No. 1 sector, posted good gains but largely in low volume. Banks, one of the groups expected to profit from higher interest rates, were little changed.

Overall, the bulls had to be content with the stock market's reaction to the rate hike. The market found something to cheer, even though there was little new in the Fed's stance.

The market could've just as easily sold off on the news. What was the message behind the pop? When a reaction can reasonably go either way and it goes bullish, that tells investors something important: The bull is very much alive.

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