Stocks surge ahead after Fed stands pat

NEW YORK >. Wall Street rallied sharply yesterday after an economic assessment by the Federal Reserve ignited hopes that the central bank has warmed to the idea of lowering short-term interest rates.

Largely thanks to yesterday's triple-digit gains, the Dow Jones industrials have surged 337 points this week, the best three-day performance for the blue chip average since November 2004.

Investors had nervously awaited the economic statement that accompanied the Fed's decision to leave short-term interest rates unchanged at 5.25 percent, and were encouraged that the central bank didn't refer to the possibility of additional firming of rates as it did in January.

I think it did a bit to assuage the equity market's concerns that the Fed understands there is a possibility that the drag on the consumer could bring GDP down below where they expect, said Quincy Krosby, chief investment strategist at The Hartford, referring to gross domestic product -- the broadest measure of the economy.

The Dow Jones industrial average rose 159.42, or 1.30 percent, to 12,447.52, after having been little changed before the Fed announcement. It was the index's biggest one-day gain since July 24.

Broader stock indicators also posted strong gains. The Standard & Poor's 500 index jumped 24.10, or 1.71 percent, to 1,435.04, and the Nasdaq composite index advanced 47.71, or 1.98 percent, to 2,455.92. The Russell 2000 index of smaller companies rose 13.87, or 1.75 percent, to 807.47.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange after being nearly even before the Fed's announcement. Volume came to 1.63 billion shares.

Bonds rose following the Fed decision. The yield on the benchmark 10-year Treasury note fell to 4.54 percent from 4.55 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude settled up 36 cents at $59.61 per barrel on the New York Mercantile Exchange. A government report showed U.S. crude oil inventories rose again last week, but gasoline stocks fell more than analysts expected.

While most of Wall Street's attention yesterday was squarely on the Fed, a few key earnings reports also drew interest. Morgan Stanley's fiscal first-quarter earnings and revenue blew past Wall Street's estimates and FedEx Corp.'s fiscal third-quarter earnings came in stronger than expected but the shipping company warned profits in the coming fiscal year could fall below its expectations.

Morgan Stanley rose $4.66, or 6.1 percent, to $80.77, while FedEx fell $1.30 to $110.99.

Software companies showed gains. An acquisitive Oracle Corp. indicated its expansion plans might be reaping dividends as its fiscal third-quarter earnings and new software sales topped Wall Street's expectations. Oracle advanced 62 cents, or 3.5 percent, to $18.17.

Adobe Systems Inc. rose $2.56, or 6.3 percent, to $43.30 after the company reported its first-quarter results topped Wall Street's expectations and the company increased its profit forecast.