The Federal Reserve policymakers are anticipated to leave interest rates at record lows in order to entice Americans to continue to spend. They’re also expected to address the financial and economic strides the country has made in recent months, reports Jeannine Aversa for the Associated Press.

The service sector grew for the second consecutive month. The reading didn’t meat analysts’ forecasts, but the reading was above 50, indicating expansion. There was also encouraging news about the labor market: the number of private sector jobs lost in October was down for the seventh consecutive month, report Sara Lepro and Tim Paradis for the Associated Press.

Retailers had their best month in ages in October. Individual chains will report sales tomorrow, and the numbers are expected to be their strongest yet, The New York Times reports. Enthusiasm is on the restrained side; after all, consumers still aren’t spending at the level that economists would like. Sales of women’s clothing, for example, are 12.2% lower than they were in October 2007. SPDR S&P Retail (NYSEArca: XRT) is up about 0.25% this morning. (Why name brands are back in favor).

Time Warner (NYSE: TWX) posted a quarterly profit and stated that its business outlook had improved in the third quarter. The television and film units outperformed, but media subscriptions and ad sales are down, reports David Goldman at CNNMoney.

Comcast (Nasdaq: CMCSA) also reported earnings this morning, noting that they jumped 22% in the third quarter. Losses in television subscriptions were offset by gains in their Internet and voice divisions, reports Lance Whitney at Cnet News. PowerShares Dynamic Media (NYSEArca: PBS) is up about 1% this morning; Time Warner is 5.2%; Comcast is 4.9%.

Pundits have said the economy is recovering, despite lingering issues. There are some key fundamentals that need to be fixed before we can call the economy “fully recovered” – job market and consumer spending, anyone?

At the least, one could say the economic momentum has shifted even if the changes aren’t yet evident on Main Street. Sarah Morgan of SmartMoney has seven other recent findings about why the economy is on an uptrend, and we’ve thrown in a few bonus ones, too:

• Ben Bernanke: “The prospects for a return to growth in the near-term appear good,” the Fed Chairman says. But the return to growth will be sluggish.
• Inflation is at still at bay. The Bureau of Labor Statistics said that the Consumer Price Index rose just 0.4% in August – and it has slipped 1.5% over the past year. This is good news for workers who have lost their jobs. It also bodes well for interest rates being kept low for the time being.
• Deals are up: Several billion-dollar deals have gone down, meaning larger corporations are doing better.
• GM is back in production. General Motors’ Vice Chairman Bob Lutz said last week that the company may need to increase production of four of its most popular new models to keep up with demand. This is good for factories and the job market.
• Industrial production is up: Companies cut inventory at a fast pace this year, but the second half of the year and into next year should see a reversal of this trend.
• Regions are reporting growth: Production and new orders indexes were both in positive territory for the first time in a year.
• A positive outlook for consumers: The healthier consumers who see bargains and start shopping will pick up where the government stimulus leaves off, sparking sustainable growth. Other consumers will begin to repair their balance sheets and begin to spend again.
• Earnings season: It started last week, and Alcoa (NYSE: AA) was the first Dow component to announce its earnings, and it was a surprise profit.
• Retail sales: Retail sales rose 0.6% in September. Although they’re still at 2005 levels, this is a positive sign that things are moving in the right direction.
• Jobs: The number of newly laid-off workers filing for unemployment last week dropped to the lowest number since the  start of this year. It’s the fourth drop in new claims in five weeks, and is being taken as a sign that some healing in the job market is still taking place.

The longer investors sit out this rally, the more they’ll miss. Instead, have a strategy for entry and exit in order to protect yourself. We use the 200-day moving average. For more information about trend following and implementing a strategy, check out The ETF Trend Following Playbook.

For more stories about trend following, visit our trend following category.

A day after the Federal Reserve announced that economic activity is improving, the National Association of Realtors said that existing home sales fell 2.7% in August, compared to a gain of 7.2% in July, snapping a four-month rally.  The number of home sales fell to an annual rate of 5.10 million units as compared to expectations of 5.35 million units.  The news sent the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) down 3.5% in morning trading.

The Labor Department reported that the number of newly laid-off workers seeking unemployment benefits fell for a third week. Initial claims for unemployment insurance fell by 21,000 to 530,000, much lower than the 550,000 expected by economists and an indicator that the economy is stabilizing.

Scott Lanman of Bloomberg states that the Federal Reserve plans to reduce its emergency programs that auction loans to commercial banks and Treasury securities to bond dealers as the financial markets continue to improve.  Additionally, Fed policymakers committed to complete their $1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December.

Black gold fell sharply in morning trading as a government report showed a larger-than-expected buildup in crude supplies.  Additionally, oil demand fell by 3% and gasoline supplies surged by more than 5 million barrels even though refineries took in 316,000 fewer barrels of crude each day.  The United States Oil Fund (NYSEArca: USO) was down 2.9% in morning trading.

All three major U.S. indexes are in the red, with the Dow Jones Industrial Average dropping 0.4%, the S&P 500 giving up 0.8% and the Nasdaq declining by 1.1%.

For more stories on oil, visit our oil category.

Kevin Grewal contributed to this article.

The Federal Reserve announced that industrial activity rose 0.8% in August, beating the 0.6% forecast by economists.  The Fed also revised July’s numbers to a rise of 1%, twice as much as previously reported.  The news sent the PowerShares Dynamic Basic Materials ETF (NYSEArca: PYZ) up 0.8% in morning trading.

The Labor Department reported that consumer prices rose in August. In fact, the “core” consumer price index rose by 1.4% over the 12 months ending in August.  This could be good news in that this rise means the central bank faces little pressure to raise its benchmark interest rate, a step it takes to ward off high inflation, report Christopher S. Rugaber and Jeaninne Aversa of the Associated Press.

U.S. long-term securities are not as attractive to foreign investors as they once were.  Foreigners purchased $15.3 billion more assets than they sold in July, compared to $90.7 billion more assets than sold in June.  China, however, is still highly attracted to U.S. securities, as the emerging nation increased its holdings of U.S. Treasuries from $776.4 billion in June to $800.5 billion in July.  These holdings are a direct result of the huge trade deficits the United States runs with the emerging Asian power.

In the health care arena, the Chairman of the Senate Finance Committee unveiled a summary of his long-awaited health care plan. Sen. Max Baucus’ plan would cost $865 billion over 10 years and mandate insurance coverage for all Americans, report David M. Herszenhorn and Robert Pear for The New York Times.  One major change is that the measure drops the public health insurance option favored by President Barack Obama and instead calls for non-profit health-care cooperatives.  The plan aims to make it easier for small groups and individuals to have health care coverage.  The news sent the Healthcare Select SPDR (NYSEArca: XLV) up about 0.5% in morning trading.

Overall, all three major U.S. indexes were up in morning trading.  The Dow Jones Industrial Average added 0.8%, while both the S&P 500 and Nasdaq added 1.1% each.

For more stories on health care, visit our health care category.

Kevin Grewal contributed to this article.

The Commerce Department reported that retail sales climbed 2.7% last month, outperforming the 2% expected by analysts.  To decipher this a bit more, retail sales excluding automobiles, which got a huge jump from the “cash for clunkers” program, rose by 1.1% topping the 0.4% forecast, reports Christopher S. Rugaber for the Associated Press.

These overall jumps were despite the worse-than-expected earnings report released by consumer electronic outfit Best Buy (NYSE: BBY).  Profits for the second quarter were $0.37/share compared to the $0.42/share predicted by analysts.  The good news was that Best Buy stated that customer traffic is stabilizing. Business inventories also rose for the 12th consecutive month in July, which means that companies could soon start to increase orders.

The news didn’t have much effect on the SPDR S&P Retail (NYSEArca: XRT) which was down 0.06% in morning trading.

In further news, the Labor Department announced that wholesale prices rose by 1.7% in August, much higher than the 0.8% predicted by analysts.  Excluding energy and food costs, core inflation rose by 0.2%, while energy prices were up 8% and food costs edged up 0.4%.  Traditionally, these increases are signs of inflation, but with unemployment rates at elevated levels and a weak labor market, inflationary pressures could be under control.

To further support the notion that the economy is recovering, manufacturing in the New York region grew in September at the fastest pace in two years.  The Federal Reserve Bank of New York’s general economic index rose to 18.9 from a 12.1 in the previous month.  Looser credit markets, increases in business spending and a stabilizing economy are all pushing manufacturing up.

Overall, the Dow Jones Industrial Average was down 0.2%, the S&P 500 dropped 0.1% and the Nasdaq added 0.2% in morning trading.

For more stories on manufacturing, visit our manufacturing category.

Kevin Grewal contributed to this article.

President Barack Obama announced the reappointment of Federal Reserve Chairman Ben Bernanke this morning, reports Bloomberg.  Many believe that Bernanke was the mastermind behind a strategy that lifted the economy out of a horrific recession, unlocked credit and stabilized the financial markets.  The news sent the Financial Select SPDR (XLF) up nearly 1.3% in intraday trading.

In the real estate world, home prices posted their first quarterly increase in three years, signaling that the housing market has turned a major corner.  The S&P Case-Shiller Index rose nearly 3% from the first quarter of the year to a reading of 133.  Additionally, all but two cities, Las Vegas and Detroit, saw home prices rise from May to June.  The report sent the iShares Dow Jones U.S. Real Estate Index (IYR) up 0.8% in morning trading.

In other news, the White House and Congress have cited a worse than expected economy as the reason behind exploding deficits and mounting debt over the next decade, reports Lori Montgomery for The Washington Post.  Both the White House Office of Management and the nonpartisan Congressional Budget Office predicted the budget deficit for the year will be a record high $1.6 trillion.  Additionally, the figures indicate a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than anticipated in May.  Both projections state that the only way to curb this is through cost cutting and revenue increasing.

The New York based Conference Board said its consumer confidence index rose to 54.1 from a 47.4 in July.  The index is still well below the 90 that it needs to indicate a healthy economy, but it is heading in the right direction.  Additionally, consumer expectations for the economy over the next six months rose to 75.3 from 63.4 in July marking its highest level since December 2007, when the recession started, reports Sara Lepro for the Associated Press.

Overall, all three major U.S. indexes were up with the Dow Jones Industrial Average leading the way adding 0.6%, followed by the S&P 500 up nearly 0.5% and the Nasdaq gaining 0.5%.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.

Comments from Federal Reserve Chairman Ben Bernanke and encouraging real estate reports indicating that the prospects of a near-term economic recovery in the United States are good, which made investors happy. This recent bout of optimism, in addition to good economic news from the eurozone, sent world stocks to a 10-month high.

Additionally, crude oil rallied toward $75/barrel, also reaching a 10-month high.  Growing signs of a global economic recovery and rising tensions in Nigeria promoted support in black gold and sent the United States Oil Fund (USO) up 0.9% in intraday trading.

Industrial orders in the 16-nation eurozone rose 3.1% in June from the quarter before, indicating that manufacturing on the continent may be emerging from the recession.  A key gauge of the industry’s future growth – new orders – rose in both Germany and France, underscoring improvements in the region.

In shipping news, the Baltic Dry Index, which is already down 26% for the month, is expected to take a further decline, as China puts the brakes on commodity purchases, report Art Patnaude and Neena Rai for The Wall Street Journal.  The index is a barometer for shipping costs for commodities and is seen as a key indicator for global economic growth and production.  This most recent drop in the index is the sharpest decline since October, when uncertainty sent the index down 72%.

In an attempt to bolster innovation and jump ahead of the curve, cell phone maker Nokia (NOK) announced that it is making an entry into the PC market with the unveiling of its mini-laptop computer.  The Netbook computer will utilize Windows software and will be a fully-functional computer with high-speed mobile Internet access capability.

Overall, all three major U.S. indexes were up in morning trading with the S&P 500 leading the pack, up 0.9%, followed by the Dow Jones Industrial Average adding 0.8% and the Nasdaq gaining nearly 0.7%.

For more stories on crude oil, visit our oil category.

Kevin Grewal contributed to this article.

Most believe that the Fed will leave its bank lending rate at zero to entice lending and further stabilize the financial system.

The U.S. trade deficit rose 4% to $27 billion in June, which reflected an increase in imports of 2.3%. It was the first increase in nearly a year, indicating that the demand in the United States is starting to recover.  Exports increased by 2%, indicating that global demand is increasing.

In the real estate arena, U.S. mortgage applications dropped last week, reflecting a drop in demand for home refinancing loans as interest rates soared to their highest levels since June.  Borrowing costs on a 30-year fixed mortgage jumped to 5.38%, up 0.21% from the previous week, as the seasonally adjusted index of refinancing applications decreased 7.2%.

Investors are turning more bearish on Treasuries and the dollar on speculation their appeal will diminish as the first global recession since World War II is easing.  According to a survey conducted by Bloomberg, confidence in the global economy rose to 58.1 from 39.1 in July, indicating that the economy is expected to grow. This could lead to an increase in Treasury yields and a weaker dollar, states Yie Xe of Bloomberg.  The news sent the PowerShares DB U.S. Dollar Index Bullish (UUP) down nearly 0.6% in morning trading.

In the earnings world:

• Retailer Macy’s (M) reported a better-than-expected second-quarter profit of $0.20/share as compared to the $0.15/share Wall Street expected.  Revenues of the company were down 10% and same-store sales dropped 9.5% from a year ago and the performance was driven by aggressive cost-cutting measures.
• In Switzerland, the world’s largest food maker, Nestle, reported its first profit decline in six years as net income declined 2.8%.
• ING Groep (ING) reported a drop in profits of 96%, as the largest Dutch-based financial services failed to meet analysts’ expectations.

Overall all three major U.S. indexes gained ground with the Nasdaq leading the way at 1.6%, followed by the Dow Jones Industrial Average gaining 1.3% and the S&P 500 adding 1.2%.

For more stories on currencies, visit our currency category.

Kevin Grewal contributed to this article.

In the absence of big news, all eyes are on the upcoming Federal Reserve meeting, which takes place tomorrow and Wednesday. The consensus is that they’ll leave the main target lending rate near zero, reports The Washington Post. The biggest question is whether the Fed will let a program to buy $300 billion in U.S. Treasury bonds expire. The program was created to lower long-term interest rates and generally make lending conditions more favorable.

McDonald’s (MCD) announced that its same-store sales rose 4.3% in July. The United States’ largest hamburger chain is apparently benefiting from price-conscious diners, as well as a huge promotion of its new line of coffee drinks, says Betsy Vereckey for the Associated Press. McDonald’s fared even better overseas: in Europe, their same-store sales jumped 7.2%.

• PowerShares Dynamic Food & Beverage (PBJ): up 5.6% year-to-date; McDonald’s is 4.9%

Options traders are keeping an eye on the rally seen in the S&P 500 and increasing their bets that it won’t last in September. That month historically has been the worst for U.S. equities, say Jeff Kearns and Michael Tsang for Bloomberg. Traders are now betting that the VIX, a measure of market fear, will gain 13% in the next five weeks.

• iPath S&P 500 VIX Short-Term Futures ETN (VXX): down 20% in the last month

General Motors will begin selling cars and trucks on eBay tomorrow in an effort to reach new customers and restore its lost market share. To start, the deal will involve 225 dealerships in California, but GM hopes it goes national by September, reports Nick Bunkley for The New York Times.

A government report indicated that sales of new homes rose by 11% last month, the largest amount in the last eighth years. Unfortunately, it isn’t all good news surrounding the sector.  As the number of new homes sold rose, the median sales price of these homes declined by 12% to $206,200.  The news sent the iShares Dow Jones U.S. Real Estate Index (IYR) up nearly 0.6% in morning trading.

In the earnings world:

• Verizon Communications (VZ) reported a decline in quarterly profits and announced that it will trim its labor force by 8,000. The communications giant reported income of $0.63/share, in line with Wall Street’s expectations.
• Among other companies reporting earnings, medical giant Aetna (AET) reported a 28% decline in profits because of higher medical expenses and cut its profit forecast for the second straight month.
• Manufacturer Honeywell (HON) reported a decline in earnings of 38% as it felt the impact of hurting automotive and construction industries.

Black gold followed the markets this morning, fluctuating between gains and losses.  Most traders weighed the positive economic news from the real estate sector with lackluster earnings reports, sending light sweet crude oil to $68.99/barrel and the United States Oil Fund (USO) up 0.2% in intraday trading.

Federal Reserve Chairman Ben Bernanke stated that the nation can learn from the demise of its financial sector, the current recession and can help make the economy stronger than it was before.  He emphasized that the bread and butter behind rebuilding a sound economy is consumer saving.  Lastly, he said that there are signs that the economy is in recovery mode, but the process will be slow and steady. GDP will likely rise by the end of 2010, however, unemployment will most likely lag, reports David Goldman of CNN Money.

Overall the Dow Jones Industrial Average declined 0.1%, the S&P 500 gave back and the Nasdaq was down 0.3% in morning trading.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.