Stocks rise amid
hope about rates

NEW YORK >> Stocks strode higher yesterday as investors grew hopeful that the interest rate tightening cycle might soon draw to a close, but a late-session rise in oil prices limited Wall Street's gains. Bonds rallied, sending the yield on the 10-year Treasury note below 4 percent.

Data from the Institute for Supply Management indicated that the manufacturing sector is continuing to expand, albeit at a slower pace, and a component within the index that measures prices paid by purchasing managers suggested inflation remains in check. That, combined with an influx of capital amid questions about whether the proposed European Union constitution would be approved, added up to good news for U.S. markets, said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.

"The Fed has told us they will continue to raise rates at a measured pace, but each decision will be made on the basis of existing or current conditions. And current conditions tell me that it's not a sure bet the Fed will raise rates at their June 30 meeting," Johnson said.

The Dow Jones industrial average rose 82.39, or 0.8 percent, to 10,549.87, rising as much as 123.51 before giving up some of its gains as oil prices surged more than $2.60 per barrel.

Broader stock indicators also moved sharply higher. The Standard & Poor's 500 index was up 10.72, or 0.90 percent, at 1,202.22. The Nasdaq composite index climbed 19.64, or 1 percent, to 2,087.86.

Bonds continued to build on Tuesday's rally; the yield on the 10-year Treasury note dropped to 3.88 percent, from 3.98 percent late Tuesday. The euro slid to its lowest level against the dollar in eight months as voters in the Netherlands joined France in rejecting the EU constitution, putting any economic reforms it might bring on hold. Gold prices rose.

Oil futures soared, climbing $2.63 to $54.60 per barrel on the New York Mercantile Exchange on concerns that strong demand for diesel will leave it and other distillate fuels, including heating oil, in short supply later this year. Government inventory data, due today, was also expected to influence trading.

Earlier in the day, investors had been encouraged by remarks from Federal Reserve Bank of Dallas President Richard Fisher, who suggested the current rate tightening cycle is drawing to a close. Referring to the previous eight interest rate hikes, which brought the federal funds rate to 3 percent, Fisher told the Wall Street Journal, "We've gone through eight innings here, 25 basis points an inning."