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Tickers in this Article: BA, GE, XLI, XLB, CAT, DD
Another Federal Open Market Committee confab has drawn to a close and with hopes for more quantitative easing have once again been dashed. The Federal Reserve did say it will keep Operation Twist going through the end of the year and the central bank reiterated its long-held view that short-term interest rates will remain near historic lows for at least another two years. The low interest rate news should help profitability at banks, at least the ones that don't take unnecessary trading risks while the continuation of Operation Twist could help light a fire under the discretionary stocks.

However, without the benefit of more monetary easing, two sectors that have been holding up surprisingly well lately may see those good runs come to an end. Industrials and materials are the ones that come to mind when talking about sectors that really could have used a jolt of QE 3.

The Business Roundtable's economic outlook index fell to 89.1 in the second quarter from 96.9 in the first quarter, according to Market Watch. That was the first decline in nine months and it indicates job growth remains sluggish in the U.S. CEOs who are members of the business group confirmed as much, saying they plan to make fewer hires in the second half of 2012 than originally planned.

How this problem pertains to industrials and materials stocks is obvious. Many of the largest U.S. employers are industrial firms such Boeing (NYSE: BA) and General Electric (NYSE: GE) and the success of their business has a major impact on materials firms, both large and small. Industrial companies, such as the large-cap names that call the Industrial Select Sector SPDR (NYSE: XLI), purchase an array of commodities, coatings, resins and chemicals that are produced by firms found in the Materials Select Sector SPDR (NYSE: XLB).

Not surprisingly, XLB and XLI share a decent amount of correlation with each other and neither could be classified as "low beta." Translation: It's constructive for broader market upside to have economically sensitive companies such as Caterpillar (NYSE: CAT) and DuPont (NYSE: DD) playing leadership roles.

While these are old-line companies that don't make flashy products like iPads or iPhones, they are still integral engines of commerce and their participation in equity market upside serves to assuage investors that the economy at large is healthy. Without the benefit of more monetary stimulus, investors have little reason to back up the bus in the near-term on XLB, XLI and the funds' underlying holdings.

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