Stocks continue sweet September ahead of Fed

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It's been a sweet September for stocks, and the rally continued Tuesday even as the dreaded "taper" looms.

The Federal Reserve's policy committee will start a two-day meeting today. And this one is particularly significant. The central bank could announce Wednesday that it will finally slow the pace of its $85 billion in monthly purchases of Treasury bonds and mortgage-backed securities.

The Fed has said that it will begin to "taper" its quantitative easing program sometime this year, and the beginning of 2014 is drawing near. Investors had been concerned earlier this summer about the impact that scaling back this massive program will have on stocks and bond yields.

But investors appear to be shrugging off those worries for now. The Dow Jones industrial average, the S&P 500 and Nasdaq all ended the day with gains. The S&P closed within just five points of a record high.

Related: The taper is coming. Get over it

What's moving: Shares of Microsoft (MSFT) rose after the company boosted its dividend by 22% and announced a $40 billion share buyback plan.

Pandora (P) shares jumped 5%, recovering from an initial slump after the company said it would sell more shares through a secondary offering.

StockTwits user rknigh2 pointed out the difference in the market's treatment of each company's news: "$MSFT 40 billion buyback... down from highs. $P announces stock offering, trading near ATH. Hmmmm..."

In other buyback news, Herbalife (HLF) surged almost 4% after a D.A. Davidson analyst said the company could announce its own large buyback in the next several weeks.

Meanwhile, airline stocks rose after JPMorgan upgraded both Delta (DAL) and U.S. Airways (LCC) to overweight from neutral. Shares of Southwest (LUV), JetBlue (JBLU) and Alaska Air (ALK) also got a boost from the upgrade.

Safeway (SWY) was a big gainer, surging 10.5% after the company adopted a "poison pill" plan to avoid a hostile takeover. Hedge fund Jana Partners disclosed Tuesday afternoon that it bought a 6.2% stake in the supermarket owner.

Facebook (FB) shares surged 6%, snapping a three-day slump. The company's shares began to slip after it hit an all-time high last week and social media rival Twitter filed for an initial public offering.

Shares of Outerwall (OUTR), the company known until recently as Coinstar, plummeted almost 12% after it slashed its guidance for the current fiscal quarter. The company's Redbox DVD rentals were weaker than expected in the summer.

"Oh you're telling me that Redbox isn't doing well, that people aren't renting DVDs from a box on the street, no way! #facepalm $OUTR," StockTwits user LDrogen wrote.

Related: Fear & Greed Index still in neutral

On the economic front, the Consumer Price Index rose just 0.1% in August, a sign that inflation remains tame.

In world market news, all major European markets closed lower. The weak performance was due in part to a fall in European monthly car sales in August. Shares in Fiat (FIADF) and Volkswagen (VLKAF) were down by roughly 1%. Asian markets also ended lower. The Shanghai Composite index was the biggest loser, suffering a 2.1% drop.

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