U.S. stocks closed mostly higher Wednesday, led again by many technology issues, as the Federal Reserve’s latest interest rate cut helped inspire more confidence in the economy’s outlook.
The tech-heavy Nasdaq composite index jumped 1% to 1,897.44, its highest close since July 30.
The Dow industrials rose 54.83 points, or 0.6%, to 9,041.11, their highest close since July 22.
In the wake of the Fed’s rate cut Tuesday, Wall Street seems reassured that the worst of the global markets’ turmoil has passed, analysts said.
Indeed, key Latin American markets rallied, with Mexican stocks climbing 2.6%, boosted by news of surprisingly strong economic growth.
Brazil’s main stock index rose to its highest level since Aug. 18.
Meanwhile, the U.S. Treasury bond market did nothing to get in stocks’ way: Short-term Treasury yields inched higher, but long-term yields eased, with the 30-year T-bond yield falling to 5.25% from 5.30% on Tuesday.
In the stock market, “when the Fed cuts rates, cyclicals [industrial companies] and technology do the best, because lower rates mean stronger growth,” said Guy Truicko, an equity portfolio manager at Lake Success, N.Y.-based Unity Management.
The Fed on Tuesday lowered its target for overnight lending between banks--the federal funds rate--by a quarter-point, to 4.75%, for the third time in seven weeks.
The move was aimed at ensuring that the recent recovery in financial markets stays on course.
Wall Street seems to be satisfied with the Fed’s moves--and not terribly worried by its veiled warning Tuesday that it may not cut rates again in the near future.
Industrial names boosting the Dow on Wednesday included GE, up $1.75 to $91.75, and 3M, up $3 to $82.06.
In currency trading, the dollar wasn’t hurt by the Fed’s latest cut. It rose versus the Japanese yen and German mark after a smaller-than-expected U.S. trade deficit in September signaled renewed demand for exports, boding well for U.S. growth. The dollar reached 121.65 yen, up 0.65 yen.
Among Wednesday’s highlights:
* The Internet sector continued to draw speculators’ interest. Hitting records were Yahoo, which soared $13.38 to $190.13; EBay, which zoomed $18.88 to $147.50; Amazon.com, which surged $15.50 to $164; and Lycos, which gained $3.88 to $64.38.
Investors are betting that Internet merchants and directories can benefit from the growing popularity of shopping online, especially this holiday season.
Also, Netscape soared $10 to $39.25 on rumors that it is in talks to team up with America Online, which jumped $8.38 to a record $83.75.
* On the downside, RealNetworks rose $1.63 to $42.88 in regular trading but fell $6.38 in after-hours trading. Microsoft said it will immediately begin selling its minority stake in the producer of software, which lets users send sound and video over the Internet.
* Among bigger tech names, Cisco Systems jumped $4.13 to a record $72.88, after the maker of computer-networking equipment was rated “buy” in new coverage by analyst Alex Cena at Salomon Smith Barney.
The outlook for equipment spending is “extremely bright, driven by the insatiable demand for band-width in an Internet economy,” Cena said in a report.
Other communication equipment makers posting gains included Lucent Technologies, up $3.63 to $89.25, and 3Com, up $3.06 to $38.56.
Also, Fore Systems surged $3.38 to $16.81 on speculation the computer-networking company may be acquired by a larger maker of networking or telecom equipment.
* Transportation stocks got a boost as oil prices again slid. Rising airline shares helped drive the Dow transportation index up 2%.
USAirways rose $2.44 to $50.50, and Delta added 56 cents to $54.19.
* Oil stocks were mostly lower, although Exxon edged up 13 cents to $70.69 and Mobil gained $1.69 to $73.63.
* Drug stocks saw renewed demand, with Merck up $2 to a record $149.38 and Warner-Lambert up $3.25 to $77.94.
Market Roundup, C8