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Stocks rise following
Fed decision on rates
NEW YORK >> Wall Street's buying momentum extended into a fifth day yesterday as investors took heart from a Federal Reserve decision to keep interest rates at their 45-year lows.
Stocks were little changed immediately after the Fed announcement, but later rose sharply amid growing investor optimism that the economy was indeed rebounding. Volume also was light, accentuating price swings.
"The Fed delivered as expected," said Chris Wolfe, equity market strategist for JP Morgan Private Bank. "Stock markets have rallied since the low point in March, and you have a lot of good news built in. The equity markets basically didn't want a surprise."
"In the meantime, you've got a Fed that continues to be accommodative, and you've got corporations continuing to do the right thing, although it may take a long time to see a lot of hiring," he said. "That will keep pressure on the Fed to keep rates low."
The Dow Jones industrial average closed up 92.71, or 1 percent, at 9,310.06, for a five-day gain of 273 points.
The broader market also rose. The Nasdaq composite index advanced 25.50, or 1.5 percent, to 1,687.01. The Standard & Poor's 500 index gained 9.76, or 1 percent, to 990.35.
Advancing issues outnumbered decliners 5 to 2 on the New York Stock Exchange. Volume came to 1.12 billion shares, slightly higher than the 1.02 billion traded Monday.
The Russell 2000 index, which tracks smaller company stocks, rose 7.68, or 1.7 percent, to 466.95. The NYSE composite index gained 42.61 to 5,594.90. The American Stock Exchange composite index inched up 2.08 to 964.89.
The Fed unanimously voted yesterday to keep the federal funds rate at 1 percent. In its decision, policymakers said the risk of deflation, although remote, continues to exceed that of inflation. That allayed investor fears that rates would be raised in the near future.
"Investors want(ed) the Fed to say the economy is improving but not so much that rates will be increasing at any time in the future," said Richard J. Nash, chief market strategist at Victory Capital Management.
Trading has been erratic in recent weeks as investors, having sent the market surging since mid-March, worried that the rally might have come too fast. They now want to see stronger evidence of a solid recovery, particularly when several economic reports are released later this week.
"It's a busy week on the calendar with retail sales and consumer confidence being the most important numbers," Nash said. "Folks are going to be following the economic data to see if the (market) jump we had in June and July will be sustainable going forward."
Deere gained $2.53 to $53.51 after the manufacturer posted earnings that beat Wall Street's estimates due to better sales of nonagricultural equipment.
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