Stocks surge higher ahead of Fed meeting
NEW YORK » Wall Street surged higher in a volatile session yesterday, offsetting the losses it incurred Friday but showing more fractiousness than conviction in an advance that lifted the Dow Jones industrials 286 points, its biggest gain in nearly five years.
Investors tried to balance their concerns about the availability of credit with hopes that today's Federal Reserve meeting will be a calming influence after two weeks of frenetic trading on Wall Street. In a day devoid of economic news and with few earnings reports, investors early in the session seemed to avoid making big bets, though stocks gained steam after midday and made their biggest advance in the final two hours.
Fed policy makers are widely expected to hold the nation's benchmark rate steady at 5.25 percent; as usual, the greater concern is with the Fed's economic assessment statement. This time, investors will be looking to see what the Fed says about credit.
"I really wouldn't read too much into it," said Charles Norton, principal and portfolio manager at GNI Capital Inc., referring to yesterday's rally. "You'd like to see it be led by the market leaders, not the sort of stuff bouncing off the bottom that's been beaten up," he said referring to financial stocks and regional banks.
The Dow soared 286.87, or 2.18 percent, to 13,468.78. The blue chips closed near their highs after zigzagging throughout much of the session. On Friday, the Dow fell 281 points.
Broader stock indicators also rebounded. The S&P 500 index rose 34.61, or 2.42 percent, to 1,467.67. The Nasdaq composite index rose 36.08, or 1.44 percent, to 2,547.33.
The rally was not as widespread as the rise in the major indexes suggested, though. Advancing issues outnumbered decliners by about 6-to-5 on the New York Stock Exchange, where consolidated volume came to a very heavy 5.09 billion shares, compared with 4.54 billion shares traded Friday.
The Russell 2000 index of smaller companies rose 10.97, or 1.45 percent, to 766.39.
Falling oil also gave a boost to stocks. Light, sweet crude futures tumbled $3.42 to $72.06 a barrel on the New York Mercantile Exchange. Gold prices fell, while the dollar moved in a mixed range against other major currencies.
Bond prices fell after rising during Friday's stock market pullback. The yield on the benchmark 10-year Treasury note rose to 4.74 percent from 4.68 percent late Friday. Bond prices move opposite yields.
Bear Stearns Cos. co-President and co-Chief Operating Officer Warren Spector resigned after the collapse of two hedge funds that invested in risky mortgage-backed securities. Bear Stearns fell sharply on the news but then recovered after a Standard & Poor's managing director said the market overreacted when the agency lowered its long-term outlook on the company.
Bear Stearns rose $5.46, or 5 percent, to $113.81, after falling below $100 briefly.
Merrill Lynch & Co. rose $4.50, or 6.4 percent, to $74.55 after a UBS analyst upgraded the nation's largest brokerage. Analyst Glenn Schorr contends the problems in the subprime mortgage and credit businesses and the potential ripple effects are now baked into the share price, which had been down nearly 25 percent for the year.