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Stocks edge higher after
Fed keeps rates steady
NEW YORK >> Investors reacted cautiously to the Federal Reserve's latest statement on interest rates yesterday, sending stocks slightly higher after the Fed suggested it would move carefully when raising the nation's base lending rate.
The Fed's Open Market Committee did not raise rates at meeting yesterday, but the panel's comment after the meeting said the central bank would do so "at a pace that is likely to be measured."
While the Fed dropped earlier language that said it would be "patient" in raising rates, investors felt the prospect of a measured, responsible increase was promising. However, it also raised uncertainty as to when the Fed would act.
"The decision as well as the statement were generally expected," said Hugh Johnson, chief investment officer at First Albany Corp. "They've responded to critics who say they should raise rates quickly and by a lot, and that's very reassuring to investors. But they also built in a lot of flexibility on when they might raise rates."
Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to 2.05 billion shares, compared with 1.97 billion at the same point Monday.
The Dow Jones industrial average was up 3.20, or 0.03 percent, at 10,317.20. The Dow had surged more than 68 points in late trading, but quickly gave up ground as analysts dissected the Fed's statement.
Broader stock indicators were also higher. The Standard & Poor's 500 index was up 2.06, or 0.2 percent, at 1,119.55, and the Nasdaq composite index climbed 11.76, or 0.6 percent, to 1,950.48. The Russell 2000 index of smaller companies was up 4.16, or 0.7 percent, at 569.64.
The price of the Treasury's 10-year note closed down 13/32 point, while its yield rose to 4.56 percent from 4.50 percent Monday. Two-year Treasury note prices were unchanged, but their yield rose to 2.32 percent from 2.31 percent Monday.
With the strong rally in stocks in 2003 and a surge in the health of the nation's economy, it was considered unlikely that the Fed would wait until year's end to raise rates, as some analysts had previously expected, since the threat of inflation would be higher.
In the meantime, the economy continued to move forward. According to a new Commerce Department report, factory orders rose 4.3 percent in March, the biggest jump since July 2002. The reading was far higher than the 2.4 percent increase expected by economists. The stronger-than-expected rise in durable goods -- appliances, vehicles and other long-lasting products -- could mean higher demand, which in turn could cause prices to rise and trigger inflation.
Corporate earnings from the first quarter continued to be mostly positive. Tyco International Ltd. saw its profits increase more than fivefold from a year ago, fueled by lower costs and strong operating income from its various industrial segments. Tyco was up $1.09 at $29.07.
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