Fed minutes help ease investor fears
NEW YORK » Stocks came off early losses to finish higher yesterday as investors set aside some concerns about the economy after finding reassurance that the Federal Reserve remains committed to shoring up the economy before worrying about inflation.
A rebound in hard-hit stocks of financial companies helped fuel the session's turnaround, while an upbeat forecast from Hewlett Packard Co. pulled technology issues higher and record prices for oil gave a boost to energy stocks.
Thomas J. Lee, equities analyst at JPMorgan, said the minutes from the Fed's meetings last month indicate the central bank could quickly step in to address inflation should that become necessary but that shoring up the economy would remain its immediate concern.
"It's a very different Fed. It's not a Greenspan Fed. Gradualism is out," Lee said.
The Dow Jones industrial average rose 90.04, or 0.73 percent, to 12,427.26 after at one point being down nearly 110 points.
Broader stock indicators also moved higher. The Standard & Poor's 500 index advanced 11.25, or 0.83 percent, to 1,360.03, and the Nasdaq composite index rose 20.90, or 0.91 percent, to 2,327.10.
The Russell 2000 index of smaller companies rose 7.68, or 1.09 percent, to 710.02.
Advancing issues outnumbered decliners by about 3-to-2 on the New York Stock Exchange, where consolidated volume came to 3.75 billion shares compared with 3.5 billion shares traded Tuesday.
Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.89 percent from 3.87 percent late yesterday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude oil rose 73 cents to settle at a record $100.74 a barrel on the New York Mercantile Exchange. Oil closed above $100 for the first time Tuesday, derailing a stock market rally and touching off Wall Street's latest inflation concerns.
Economic news initially sent stocks lower yesterday. The U.S. Labor Department reported a 0.4 percent increase in the consumer price index, and a 0.3 percent increase in the core consumer price index, which strips out often-volatile energy and food prices. The rises came in slightly higher than econo-mists surveyed by Thomson Financial/IFR had anticipated.
Investors have at times shown concern that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.
By the afternoon, stocks turned positive after big names in the financial sector began to rebound and as H-P, one of the 30 stocks that comprise the Dow Jones industrial average, raised its profit forecast for the year. H-P shares rose $3.49, or 7.9 percent, to $47.44.
In other corporate news, a unit of Kohlberg Kravis Roberts & Co., one of the world's largest private-equity firms, said it has for the second time delayed payment on millions in loans and begun discussions with creditors about restructuring its debt. KKR Financial Holdings LLC, which invests in corporate debt and mortgages, fell 28 cents to $14.25.