Stocks close higher despite rate worries
NEW YORK » Stocks finished moderately higher in an uneven session yesterday as optimism about the economy helped investors overcome some of their uneasiness about the Federal Reserve's decision on interest rates.
The energy sector rose on a 5 percent spike in oil prices, while news that billionaire investor Carl Icahn was seeking to join Motorola Inc.'s board lifted technology stocks.
But fluctuations in the major indexes reflected the market's uncertainty as it waits for the Fed to complete a two-day meeting this afternoon. Market watchers are expecting the central bank to keep rates unchanged as they have for the past four meetings after 17 straight hikes, because recent economic data has been showing slow, stable growth.
Now that investors have abandoned their hopes for a rate cut anytime soon, many are regarding this year's positive economic reports and the Fed's holding pattern as auspicious for stocks.
"If the Fed feels the economy is strong enough on its own, it means corporate earnings this year will probably be better than people were expecting," said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc. in St. Louis.
The Conference Board, a business research group, said consumer confidence rose modestly in January as the job market remained strong. That report followed regional Fed reports on Monday showing manufacturing growth in the Midwest and Texas.
The Dow Jones industrial average rose 32.53, or 0.26 percent, to 12,523.31. Broader stock indicators were also higher. The Standard & Poor's 500 index was up 8.20, or 0.58 percent, at 1,428.82, and the Nasdaq composite index rose 7.55, or 0.31 percent, to 2,448.64.
The Russell 2000 index of smaller companies rose 4.87, or 0.61 percent, at 797.97.
Advancing issues led decliners by more than 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.69 billion shares, which was unchanged from Monday's close.
The bond market edged lower as fixed-income investors also awaited the Fed's decision. The yield on the benchmark 10-year Treasury note was up slightly at 4.88 percent from 4.87 percent late Monday.
The dollar was little changed against other major currencies, while gold prices inched up.
Oil prices shot higher Monday on signs of production cuts from OPEC members. A barrel of light sweet crude rose $2.96 to settle at $56.97 the New York Mercantile Exchange. Natural gas soared more than 11 percent on forecasts of frigid temperatures in the Midwest.