Words from Fed
ease Wall Street

NEW YORK » Reassuring words from the Federal Reserve triggered late-session stock and bond rallies yesterday, as minutes from the Fed's March 22 meeting showed it planned to stick with "measured" interest rate hikes, at least in the short term. A sharp drop in oil prices also helped Wall Street recover.

While the possibility of higher and more aggressive interest rate hikes remains a concern, investors were relieved to see that the Fed's Open Market Committee was willing to keep interest rate hikes minimal even as signs of inflation in the economy increased.

The Fed raised the nation's benchmark rate by a quarter percentage point at that meeting to 2.75 percent, the seventh such increase since last summer. In keeping to their consistent pattern, policy makers noted that the nation's productivity remained strong and would help keep inflation in check -- something many investors had been hoping to hear.

"What the Fed's saying here is basically that the economy is doing all right and that we've got our eye on the ball," said Bryan Piskorowski, market analyst at Wachovia Securities. "The market was going into this expecting the worst, and now that we see a little less hawkish demeanor with this announcement, the market's got some wiggle room."

The Dow Jones industrial average rose 59.41, or 0.57 percent, to 10,507.97. The Dow had fallen more than 87 points earlier in the session, nearing its intraday lows for the year before the Fed minutes were released.

Broader stock indicators also reversed their earlier losses and gained ground. The Standard & Poor's 500 index was up 6.55, or 0.55 percent, at 1,187.76, while the Nasdaq composite index gained 13.28, or 0.67 percent, to 2,005.40.

Oil prices dropped for the sixth time in the past seven sessions after the International Energy Agency forecast slower growth in demand. A barrel of light crude settled at $51.86, down $1.85, on the New York Mercantile Exchange.

Bonds rose sharply after the Fed minutes were released, with the yield on the 10-year Treasury note falling to 4.36 percent, down from 4.44 percent late Monday. The dollar made gains against other major currencies, while gold prices fell.

Stocks fell early in the session after the Commerce Department said the nation's trade deficit hit an all-time high of $61 billion in February, a 4.3 percent increase over January that was far more than economists had expected. While U.S. exports rose by just $50 million, imports soared by $2.58 billion.