Fed Easing of Credit Buoys Market; Dow 15.10 Higher

Stocks rose in light pre-Thanksgiving trading today, boosted by long-awaited signs that the Federal Reserve had pushed interest rates lower to breathe life into the moribund economy.

The Dow Jones average of 30 industrials, up 61.64 points last week, rose 15.10 to 2,565.35.

Advancing issues outnumbered declines by nearly 3 to 2 on the New York Stock Exchange, with 896 up, 615 down and 480 unchanged.

Big Board volume totaled 140.95 million shares, down from 165.44 million in the previous session.

“The idea that we’ve got lower rates is strong medicine for the market--at least over the short term,” said Ricky Harrington, an analyst at Marion Bass Securities.

But analysts said the gains came in a thin market, with many investors sitting on the sidelines awaiting confirmation the Fed had indeed pushed interest rates lower.

“I think the key thing here is interest rates,” said one analyst. “Market participants are betting on lower rates.”

On Friday, the Federal Reserve signaled a quarter-point drop to 7.5% in the key federal funds rate, which banks charge each other on overnight loans.

Don Hays, an investment strategist at Wheat First Securities, said the Fed’s announcement today that it had added reserves to the banking system showed further willingness to ease monetary policy.

More money in the system would push interest rates lower--good news for corporations as they struggle against widespread economic slowdown.

Marion Bass’s Harrington predicted the Fed would lower rates again in the next few weeks, following a quarter-point cut late last month and Friday’s perceived cut.

Bond prices fell on renewed concerns that surging oil prices would accelerate inflation.

The Treasury’s key 30-year bond fell 1/2 point, or $5.00 per $1,000 in face amount, around midday. Its yield, which rises when prices fall, was up to 8.49% from 8.45% late Friday.

Traders said bond prices began to weaken on news reports that Iraq was preparing to send an additional 250,000 troops to Kuwait, more than doubling its military strength in the occupied emirate.

Intensifying oil-shortage worries, the news sent petroleum prices bouncing off earlier lows to edge above the $30 a barrel mark around midday, sending inflationary shivers through the credit markets.

Inflation generally erodes the value of bonds.

“Any rebound in oil prices in the short-term throws an improving inflation environment in question,” said Ward McCarthy, managing director at Stone & McCarthy Research Associates Inc.

In the secondary market for Treasury bonds, short-term maturities fell 1/16 point to 1/8 point, intermediate maturities lost 5/32 point to 7/32 point and long-term issues were down 11/32 point to 15/32 point, the Telerate Inc. financial information service reported.