Stocks’ Late-Session Rally Reverses Losses
Stocks and bonds mounted strong rallies late in the trading session Tuesday after the minutes of the Federal Reserve’s March meeting suggested that the central bank was likely to stick to a “measured” course in raising interest rates in the near future.
A sharp drop in oil prices also buoyed financial markets.
The Dow Jones industrial average, which had been down nearly 90 points with two hours of trading to go, vaulted higher on news of the Fed’s report and ended the day up 59.41 points, or 0.6%, at 10,507.97.
Investors also snapped up long-term Treasury bonds, driving the yield on the benchmark 10-year T-note down to a five-week low of 4.35% from 4.43% on Monday.
The rallies reflected relief that the Fed minutes didn’t indicate significantly more concern about inflation than policymakers already had publicly stated, some analysts said.
Some investors had feared that the meeting minutes would signal that the Fed was poised to speed up interest rate increases because of inflation fears.
But the report on the March 22 gathering said Fed members decided that “an accelerated pace of policy tightening did not appear necessary at this time.” That suggested the central bank would continue to raise its key short-term rate, now 2.75%, in increments of a quarter-point per meeting, analysts said.
“The market was going into this expecting the worst, and now that we see a little less hawkish demeanor with this announcement,” said Bryan Piskorowski, market analyst at Wachovia Securities.
Among broader stock indexes, the Standard & Poor’s 500 gained 6.55 points, or 0.6%, to 1,187.76, and the Nasdaq composite rallied 13.28 points, or 0.7%, to 2,005.40.
Winners topped losers by about 5 to 3 on the New York Stock Exchange and by a narrower margin on Nasdaq.
Share prices were in the red for much of the day, weighed down by the government’s report that the nation’s trade deficit ballooned to a record in February. The Fed report and sliding oil prices offset the gloom from the trade report, analysts said.
Some analysts said “short covering” helped stocks and bonds as they began to rally. Short covering means traders who had sold borrowed securities, betting on lower prices, were rushing to buy to close out their bets.
In commodities trading, near-term crude oil futures in New York slid $1.85 to $51.86 a barrel, a six-week low, after the International Energy Agency trimmed its estimate of energy demand this year.
Traders expect that the stock market’s focus soon will shift to first-quarter earnings reports, which will dominate business headlines in the next few weeks.
In other trading Tuesday, the dollar gained ground against the euro and the yen despite the trade report. The dollar edged up to 107.78 yen from 107.72 on Monday; the euro fell to $1.288 from $1.298.
Among the day’s highlights:
* Among companies reporting earnings, media giant Gannett rose $1.19 to $80 and Pepsi Bottling jumped $2.69 to $29.74. Both rallied despite reporting lower results. Genentech gained $1.12 to $57.72 after reporting a 61% rise in quarterly earnings.
* Black & Decker soared $7.99 to $87.66 after the toolmaker sharply raised its estimate of first-quarter results.
* Bank stocks gained as interest rate concerns eased. Wells Fargo rose 63 cents to $60.63, Placer Sierra Bancshares surged $1.43 to $25.76 and Citigroup was up 84 cents to $46.45.
* Utility stocks continued their recent rally. The Dow utility index rose 3.59 points, or 1%, to a four-year high of 369.84. FirstEnergy jumped 71 cents to $42.71 and PG&E;, parent of Pacific Gas & Electric, gained 35 cents to $35.35.
* Companies with asbestos-liability claims rose as Senate Judiciary Committee Chairman Arlen Specter (R-Pa.) said lawmakers were “very close” to a bipartisan agreement creating a fund to compensate victims.
WR Grace, a former producer of asbestos-tainted insulation, soared $2.59 to $10.63. USG rocketed $8.63 to $43.90 and Owens Corning jumped $2.15 to $4.68.
* On the downside, energy stocks were mostly lower with falling crude prices. ConocoPhillips sank $2.05 to $108.28, Occidental Petroleum lost $1.10 to $71.67 and Encana was off $1.87 to $68.53.
* Farm machinery maker Deere lost 31 cents to $66.10 after falling as low as $63.53. A monthly industry survey showed that North American sales of four-wheel-drive tractors fell 12% in March from a year earlier. Another equipment maker, Agco, was off 13 cents to $17.45.
* EBay slipped 31 cents to $33.66, a 52-week closing low. The shares fell as low as $31.95. The Internet auction site company has been dogged by investor concerns that its growth is slowing.
* Ford Motor continued to lose ground, dropping 38 cents to a 52-week low of $10.06. The auto giant last week warned that earnings this year would be below expectations. General Motors also remained under pressure, falling 25 cents to $29.
