Wall Street builds on gains from Tuesday
NEW YORK » Wall Street built on its gains Wednesday as investors bet that the cheaper money the Federal Reserve unleashed with its decision to cut interest rates will give a boost to corporate profits and the overall economy.
The rise in stocks for a second day appeared to reassure some investors that Tuesday's huge advance was based on reasonable optimism and amounted to more than a one-day pop.
A mild reading of the U.S. Labor Department's August consumer price index, which slipped 0.1 percent, offered support for the Fed's decision to focus on the economy and set aside some of its concerns about inflation.
Further, the U.S. Commerce Department's report that new home construction fell for the third month in a row in August offered fresh evidence that the housing market is still struggling.
Wall Street, focusing on the Fed's move to lower the target federal funds rate to 4.75 percent from 5.25 percent, was able to again look past a continued rise in energy prices. Oil settled at a fresh record yesterday.
"They're really trying to get ahead of this thing to make sure we don't slip into a recession," said Joe Vietri, vice president of active trading and investing at Charles Schwab & Co., referring to the Fed. "Certainly this is going to have a positive impact on corporate profits."
The Dow Jones industrials rose 76.17, or 0.55 percent, to 13,815.56. While the Dow finished well off its highs of the session, the gains nevertheless came a day after a jump of nearly 336 points -- its biggest one-day point gain in nearly five years.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 9.25, or 0.61 percent, to 1,529.03. The Nasdaq composite index rose 14.82, or 0.56 percent, to 2,666.48.
The recent gains leave the Dow only 1.3 percent below its closing high of 14,000.41 set two months ago.
The S&P, which also saw a record close on July 19, is 1.6 percent below that level.
The Nasdaq, down about 2 percent from mid-July, sits well below the levels it reached amid the dot-com bubble early in the decade.
Wall Street's July high came before concerns about a weakening housing market and souring home loans began to dominate Wall Street.
The Russell 2000 index of smaller companies was a big advancer again yesterday. The index rose 10.77, or 1.34 percent, to 817.40.
Small-cap stocks had taken a hit in Wall Street's recent retrenchment as investors often regard bigger companies as better able to weather an economic downturn because of substantial overseas operations and an ability to perhaps skate by on thinner profit margins.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.82 billion shares, compared with 3.71 billion shares traded Tuesday.
Bonds ended sharply lower as investors transferred more money from fixed income investments to stocks.
The yield on the benchmark 10-year Treasury note rose to 4.52 percent from 4.47 percent at Tuesday's close.