Stocks rise after Fed holds rates
NEW YORK » Wall Street closed higher yesterday, holding onto its gains after the Federal Reserve kept short-term interest rates steady, as expected, but left the door open to additional rate hikes.
The Federal Open Market Committee said it is seeing a continuing moderation in economic growth, partly reflecting the cooling of the housing market. It added that inflation pressures seem likely to moderate over time, but said some inflation risks remain.
"The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information," the Fed said in its policy statement.
Stocks were already higher before the Fed announcement, rebounding from Tuesday's losses on news yesterday that Oracle Corp.'s quarterly profit rose 29 percent and Morgan Stanley also had a strong quarter.
The Fed's move "sets a great stage for better market performance going into the end of the year, although the market may need to take a breather for the next day or two," said Steve Neimeth, senior portfolio manager for AIG SunAmerica Asset Management.
The Dow Jones industrial average gained 72.28, or 0.63 percent, to 11,613.19.
Broader stock indicators also closed higher. The Standard & Poor's 500 index rose 6.87, or 0.52 percent, to 1,325.18, and the Nasdaq composite index, lifted higher by Oracle's news, rose 30.52, or 1.37 percent, to 2,252.89.
Advancing issues led decliners by roughly 2 to 1 on the New York Stock Exchange.
Crude oil futures fell on a government report of increased supplies of crude and distillates, including heating oil. A barrel of light crude settled at $60.46, down $1.20, on the New York Mercantile Exchange.
Markets were unsettled Tuesday by a bloodless coup in Thailand that ousted the unpopular caretaker prime minister and left the chief of the army in charge. European markets rebounded smartly yesterday.
Many strategists were saying, even before the Thai coup, that the "risk premium" in the market was too thin. The risk premium is the extra return investors might expect as a reward for taking on extra risk.
As some investors have trimmed their riskier holdings, traditionally defensive sectors such as utilities, consumer staples and health care have gains, said Matthew Smith, Vice President and Portfolio Manager, Smith Affiliated Capital, which specializes in bonds.