The markets drifted though much of the session until the Fed notes were released and then the markets made some solid gains. When the Fed cut interest rates last month there was a change of policy, but also a change of heart, and this was the first chance to assess that by reading the official Fed minutes.

The NYSE had volume of 2.9 billion shares with 2,282 shares advancing while 996 declined for a gain of 93.88 points to close at 10,280.31. On the NASDAQ, 1.9 billion shares traded, 1,726 advanced and 1,252 declined for a gain of 16.54 to 2,803.91.

XM Satellite Radio Holdings, Inc. (NASDAQ: XMSR) rose $0.98 (7%) to $15.24. Goldman Sachs Group, Inc. (NYSE: GS) rose $12.24 (5%) to $239.20. Yum! Brands, Inc. (NYSE: YUM) rose $1.82 (5%) to $38.11 after reporting Q3 profits of 0.50 per share. Akamai Technologies, Inc. (NASDAQ: AKAM) rose $1.70 (5%) to $35.62.

Frontline Ltd. (USA) (NYSE: FRO) had heavy volume on the October 45 calls (FROJI) with over 138,300 options trading. There was similar heavy volume on November 45 calls (FROKI) with over 82,600 options trading. FRO is about to issue a 3.25 dividend, so this activity is likely dividend arbitrage. Accenture Ltd. (NYSE: ACN) saw heavy volume on the October 35 calls (ACNJG) with over 30,500 options trading. Alcoa, Inc. (NYSE: AA) saw heavy volume on the October 40 calls (AAJH) with over 25,500 options trading. SLM Corporation (NYSE: SLM) saw heavy volume on the November 50 calls (SLMKJ) with over 25,800 options trading after a filing suit over the failed takeover. In options there were 4.6 million puts and 6.8 million calls traded for a put/call open interest ratio of 0.68.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

The markets were lower today as they await the Fed meeting tomorrow. The Fed has shown a willingness to act in the current economic environment as it cut intra-bank rates at a meeting a few weeks ago. Most Fed meetings are widely predicted events as investors have already priced in the changes. It would appear the market is expecting a rate cut of at least one quarter point; although there are some who think that one half point may be more appropriate now. Assuming the Fed cuts rates it would mark a change in direction and then open up the question of what is the Fed going to do at the next meeting.

Even if one correctly guesses what the Fed is going to do; the markets reaction is anyone's guess. Some may not be happy with a quarter point cut. The Fed appears to caution on the side of no action-for example it didn't cut rates after Hurricane Katrina. It will be interesting to see what happens. What do you think the Fed will do?

The NYSE had volume of 2.4 billion shares with 1,043 shares advancing while 2,245 declined for a loss of 65.90 points to close at 9,607.75. On the NASDAQ, 1.5 billion shares traded, 879 advanced and 2,111 declined for a loss of 20.52 to 2,581.66. Newell Rubbermaid (NYSE: NWL) rose $2.26 (9%) to $28.02. RadioShack (NYSE: RSH) fell $1.56 (-7%) to $22.10. Las Vegas Sands (NYSE: LVS) rose $4.91 (4%) to $125.60.

General Motors (NYSE: GM) traded heavy volume on the September 37.50 calls (GMIU) with over 41,900 options trading. CBOE S&P 500 Volatility Index (NASDAQ: $VIX) saw heavy volume on the September 30 calls (VIXIF) with over 30,400 options trading. Johnson & Johnson (NYSE: JNJ) saw heavy volume on the January 65 calls (JNJAM) with over 25,400 options trading. The stock settled a patent dispute today. Apple (NASDAQ: AAPL) saw heavy volume on the September 140 calls (APVIH) with over 25,300 options trading. Take-Two Interactive Software (NASDAQ: TTWO) traded heavy volume on the December 22.50 puts (TUOXX) with over 34,300 options trading and the September 22.50 puts (TUOUX) with over 33,600 options trading. Best Buy (NYSE: BBY) moved heavy volume on the September 42.50 puts (BBYUV) with over 28,800 options exchanged. In options there were 4.8 million puts and 4.5 million calls traded for a put/call open interest ratio of 1.08.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.