Investors hopeful Fed will lower rates
NEW YORK » Wall Street barreled higher yesterday, propelling the Dow Jones industrials to their second straight record high close as investors shrugged off lackluster economic news and grew more optimistic that the Federal Reserve will lower interest rates as the economy cools.
The Dow, the stock market's best known indicator, soared 123.27 to 11,850.61. It was only Tuesday that the 30 blue chip stocks finally reached a new closing high for the first time in nearly seven years.
The impetus for yesterday's big push higher was a growing feeling on Wall Street that the Fed might begin lowering rates soon. Investors appeared to take comfort from comments by Fed Chairman Ben Bernanke that the slowing housing market could be a drag on the economy, perhaps shaving 1 percent off of gross domestic product growth in the second half this year and into next year.
Brian Williamson, an equity trader at the Boston Company Asset Management, said Wall Street could also be taking its cues from economic reports. Two readings yesterday, one on factory orders and the other on the service sector, pointed to a further slowing of the economy.
"Maybe the market is thinking that the economic data will put the Fed on hold," he said.
The Dow's record-setting day on Tuesday wiped out records that had stood since Jan. 14, 2000. The broader market indicators are still lagging as they try to recover from the turmoil that began with the dot-com bust early in the decade.
Those indexes rose sharply yesterday along with the Dow, which had a gain of 1.05 percent. The average rose up to 11,851.25, which stands as its current trading high.
The Standard & Poor's 500 index was up 16.11, or 1.21 percent, at 1,350.22 and the Nasdaq composite index rose 47.30, or 2.11 percent, to 2,290.95.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.56 percent from 4.62 percent late Tuesday. The dollar was down against other major currencies, while gold prices fell.
The government surprised Wall Street by reporting a rise in crude oil inventories, and investors were also heartened by news that Saudi Arabia said it wanted to keep prices lower. That brought crude down, though it rebounded and settled up 73 cents at $59.41 a barrel on the New York Mercantile exchange. Still, oil prices are down sharply from their trading high for the year of $78.40 a barrel, which came in July.