Stocks Rise Slightly on Fed News
U.S. Treasury yields rose and stocks increased slightly after the Federal Reserve left interest rates unchanged Tuesday. Crude oil hit a new 13-year high.
Although it did not raise interest rates, the Fed’s Open Market Committee said after its meeting that it would do so “at a pace that is likely to be measured.” That statement replaced earlier language that it would be “patient” in raising rates.
Investors apparently thought the prospect of a measured, responsible increase was promising. But there remained uncertainty, in this election year, as to when the Fed would finally act to push rates higher.
“To a great extent, the decision as well as the statement were generally expected,” said Hugh Johnson, chief investment officer at First Albany Corp. “They’ve responded to critics who say they should raise rates quickly and by a lot, and that’s very reassuring to investors. But they also built in a lot of flexibility on when they might raise rates.”
The Dow Jones industrial average moved up 3.20 points, or 0.03%, to 10,317.20. The Dow had surged more than 68 points in late trading but quickly gave up ground as analysts dissected the Fed’s statement.
Broader stock indicators were also higher. The Standard & Poor’s 500 index was up 2.06 points, or 0.2%, to 1,119.55, and the Nasdaq climbed 11.76 points, or 0.6%, to 1,950.48.
The Nasdaq’s solid jump reflected improved fortunes for technology stocks amid upbeat forecasts from companies such as Teva Pharmaceutical Industries.
On the New York stock exchange, advancing issues outnumbered decliners by about 4 to 3.
U.S. Treasury bond prices fell and yields rose once it became clear that bond bears had gained the upper hand in the word-parsing game that has become commonplace after the Fed’s pronouncements.
“There is a hint that increases are going to come, but not just yet,” said Nick Buss, vice president for real estate finance at PNC Financial Services.
Bond yields and prices move in opposite directions. The return on the benchmark 10-year note pushed up to 4.57% Tuesday, matching last week’s eight-month high and well above Monday’s closing yield of 4.50%.
The dollar extended losses against major currencies after the Fed announcement.
“The dollar rallied initially on the dropping of the word ‘patient,’ but then the dollar fell because there is still uncertainty over the exact timing of when the Fed will start raising rates,” said Lauren Germain, currency strategist at Banc of America Securities in New York.
Higher interest rates typically support the dollar since they boost yields on dollar-denominated assets and increase overseas demand for dollars.
In New York trading, crude oil for June delivery settled at $38.98 a barrel, up 77 cents, the highest since it reached $39.69 on Oct. 12, 1990. An attack on Saturday at a petrochemical complex in Yanbu, Saudi Arabia, the world’s largest oil exporter, sparked worries over possible supply disruptions.
Among Tuesday’s market highlights:
* Teva Pharmaceutical added $2.30, to $62.65. Teva said first-quarter profit, excluding some items, was 64 cents a share, more than the 59 cents analysts expected.
* Tyco, the world’s biggest maker of electronic connectors, security systems and industrial valves, rose $1.09 to $29.07 after saying this year’s profit, excluding some expenses, would be as much as $1.58 a share, up from an earlier prediction of $1.52.
* Macrovision Corp., the maker of copyright-protection software, also boosted its annual profit forecast. Shares surged $5.18, or 30%, to $22.74.
* U.S. Steel climbed $1.43, to $29.27, after the International Iron and Steel Institute said global steel demand would increase 6.2% this year.
* Priceline.com rose 55 cents to $25.42 as the online travel website swung to a profit on higher revenue and lower costs, beating estimates by 3 cents a share.
* Radio station operator Clear Channel Communications skidded 25 cents to $41.79 after reporting earnings that beat Wall Street expectations by 2 cents a share. The company also reported that its chief executive underwent surgery for a blood clot in his brain Friday and was expected to recover.
* Qwest Communications International slipped a penny to $4.01 after the telecommunications company posted a loss of 17 cents a share, 4 cents worse than analysts had expected.
