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At the open: Stocks rise, betting on more Fed stimulus

Traders work at the Knight Capital kiosk on the floor of the New York Stock Exchange. The market maker said a technology issue had affected the routing of shares of around 150 stocks to the New York Stock Exchange Wednesday, where abnormal volatility roiled the markets in early trading.


North American stock markets opened modestly higher, as investors bet that the Federal Reserve will continue to take adequate measures to keep the U.S. economy growing after its two-day policy meeting wraps up this afternoon.

In early trading, the S&P/TSX composite index was up 36 points, or 0.3 per cent, at 12,318; the S&P 500 was up 4 points, or 0.3 per cent, at 1,432; and the Dow Jones industrial average was up 37 points, or 0.2 per cent, at 13,286. Oil was up $1.19 at $86.98 (U.S.) and gold was up $8.70 at $1,718.30.

The Federal Reserve will announce its latest decision on interest rates this afternoon, as well as its projections on the U.S. economy. Chairman Ben Bernanke will also hold a news conference.

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Key to all this will be the Fed's latest quantitative easing plans. The market expects the Fed will announce about $45-billion (U.S.) in monthly medium- to long-dated Treasury purchases, in addition to its program to buy $40-billion in mortgage bonds each month.

Markets will therefore be sensitive to the Fed announcing Treasury purchases below the consensus view of $45-billion, or any hints that Mr. Bernanke is altering his outlook for how long quantitative easing measures will continue. So far, he has given no clear end date.

Fiscal cliff negotiations, meanwhile, may continue to sway market sentiment today. President Barack Obama reportedly has reduced his demand for tax increases in a new budget to $1.4-trillion from $1.6-trillion as talks continued Tuesday with House Speaker John Boehner.

There are strong indications that the talks are going to go down to the wire, with Senate Majority Leader Harry Reid stating Tuesday that it was unlikely a deal could be reached before Christmas. More than $600-billion (U.S.) in spending cuts and tax hikes are scheduled to kick in at the start of 2013 unless a deal is reached. A major area of friction in the talks now appears to be whether a deal should include an increase in the debt limit - and by how much.

There was more dismal news out of Europe overnight, although investors are pretty used to that by now. Industrial production in the euro zone fell 1.4 per cent in October, new figures revealed. Many economists were expecting modest growth.

Here's a look at some stocks moving on early news:

Bill Gates has increased his overall stake in Canadian National Railway Co. to about 12 per cent after a company he owns acquired an additional 13,670 shares for $1.25-million. Shares of CN are nearly flat in early trading.

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Berkshire said it bought 9,200 of its Class A shares from the estate of a shareholder, purchased at $131,000 per shares. Berkshire shares are up 1.7 per cent.

Shares of rare-earth producer Molycorp Inc. are down 2.6 per cent after it said late Tuesday that CEO Mark Smith has left the company.

Costco Wholesale Corp. shares are down less than 1 per cent after the retailer reported a 30 per cent surge in quarterly earnings, beating analyst expectations.

DuPont Co. shares are up 2.1 per cent after the chemical maker announced a share buyback and forecast 2012 earnings to come in at the high end of expectations.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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