Stocks advance after release of Fed report

NEW YORK » Wall Street closed out an uneasy May with a solid advance yesterday, even after minutes from the last Federal Reserve meeting indicated that inflation pressures raised the chance of another interest rate increase in June. The major indexes ended the month broadly lower.

Investors have been searching for clarity on the Fed's next move after the central bank said in early May that higher rates could be needed to battle soaring energy prices. The notes from the Fed's May 10 meeting said its inflation expectations have increased somewhat and left only a slight hint of a pause next month.

But Douglas Porter, a senior economist for BMO Nesbitt Burns, said there were no major surprises in the minutes given recent signs of economic strength and high oil prices. Stocks tumbled after the Fed report was released but regained their footing shortly after.

However, "the overall impression the minutes leave is that there's a bit more concern about inflation than in previous minutes," Porter said. "I think it comes across loud and clear that these concerns are starting to weigh heavily on Fed members."

After an upbeat start to May, a muddled inflation picture left stocks languishing during the last half of the month, and investors still appeared to be nervous. On Tuesday, a jump in oil prices, weakening consumer strength and poor sales at Wal-Mart Stores Inc. triggered a 184-point slide for the Dow Jones industrial average.

At yesterday's close, the Dow gained 73.88, or 0.67 percent, to 11,168.31, after rising as much as 89 points earlier.

Broader stock indicators were also higher. The Standard & Poor's 500 index rose 10.25, or 0.81 percent, to 1,270.09; the Nasdaq composite index added 14.14, or 0.65 percent, to 2,178.88, but still showed a loss for the year.

Bonds slumped on the prospect of rising interest rates, with the yield on the 10-year Treasury note climbing to 5.13 percent from 5.08 percent late Tuesday. The U.S. dollar advanced against the Japanese yen and was flat versus European currencies; gold prices stood near $650 an ounce.

Lower crude futures helped calm the market's inflation jitters. Reports that the United States is ready to join talks with Iran over its nuclear activities eased worries about a supply cutoff and sent a barrel of light crude falling 74 cents to $71.29 on the New York Mercantile Exchange.

For the month of May, the Dow lost 1.75 percent, the S&P 500 declined 3.09 percent and the Nasdaq plunged 6.19 percent.