Stocks gain sharply on hint of rate cut
NEW YORK » Wall Street advanced sharply yesterday as investors interpreted minutes from the Federal Reserve's last meeting as indicating the central bank is ready to keep cutting interest rates to boost the economy.
The minutes from the Federal Open Market Committee's Sept. 18 meeting, when Fed governors voted unanimously to cut rates a half percentage point, also showed that officials were concerned that the weakness in the dollar could lead to higher inflation. But the Fed -- signaling it is more willing to intervene -- also said the economic outlook was uncertain because of the summer's credit crisis, and that there were still risks to growth that justified lower rates.
"This adds fuel to the fire that the Fed is going to try and reinvigorate the economy with further cuts, and that's what they are committed to," said Richard E. Cripps, chief market strategist for Stifel Nicolaus.
Further, Federal Reserve Bank of St. Louis President William Poole said during a speech today he believes the financial markets are "still fragile" from weakening credit conditions, but that it appears to be stabilizing.
The Dow rose 120.80, or 0.86 percent, to 14,164.53, eclipsing the previous record close of 14,087.55 reached Oct. 1. The Dow had a new trading high as well, rising to 14,166.97.
The S&P rose 12.57, or 0.81 percent, to a record close of 1,565.15. It surpassed the previous record close of 1,557.59, reached last Friday, and also hit a new trading high of 1,565.26.
The Nasdaq composite index rose 16.54, or 0.59 percent, 2,803.91.
The Russell 2000 index of smaller companies rose 5.58, or 0.66 percent, to 845.72.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.09 billion shares, up from 1 billion shares Monday.
Bonds slipped after the Fed minutes were released, with the 10-year Treasury note yield -- which moves inversely to its price -- rising to 4.65 percent from 4.62 percent before the minutes' release.
The Treasury market was closed Monday for Columbus Day.
The dollar was generally lower against other major currencies, while gold prices rose. Light, sweet crude rose $1.24 cents to $80.26 on the New York Mercantile Exchange.
Yum Brands Inc. rose $1.82, or 5 percent, to $38.11 after the company Monday reported stronger-than-expected third-quarter profits. While revenue in the U.S. declined, strong international sales boosted results.
Sprint Nextel Corp. fell 22 cents to $18.28 after the phone company said after the bell yesterday its Chairman, President and Chief Executive Gary Forsee would step down. The company also warned it expects full-year operating revenue to come in slightly below its targeted range.
NBC Universal said yesterday it is buying female-oriented cable television network Oxygen Media for approximately $925 million. General Electric Co., the parent of NBC, rose 49 cents to $42.02.
Google Inc. rose again yesterday after closing above $600 for the first time Monday. The stock rose $5.57 to $615.18.