Fed Report Boosts Stocks
Wall Street was stumbling through a sleepy session on Tuesday -- until a Federal Reserve report persuaded some investors that the central bank might be the close to halting its program of interest rate hikes.
The midday release of the minutes of the Fed’s last meeting drove stocks higher, adding to this month’s strong rally.
Investors jumped into interest-rate-sensitive shares, including banks, mortgage lenders and home builders.
The Standard & Poor’s 500 index gained 6.38 points, or 0.5%, to 1,261.23, its highest finish since June 2001.
The technology-heavy Nasdaq advanced 11.89 points, or 0.5%, to 2,253.56, also the highest close since June 2001.
The Dow Jones industrial average rose 51.15 points, or 0.5%, to 10,871.43, an eight-month high.
Advancing issues outnumbered decliners by nearly 3 to 2 on the New York Stock Exchange.
The Fed minutes indicated that central bank policymakers remain concerned about inflation. But the report also included a reference to concerns raised by some Fed officials about “going too far” in hiking interest rates.
The Fed is “probably getting close to the end,” said Al Kugel, chief investment strategist at Atlantic Trust/Stein Roe in Chicago. “That’s seeping into the market. Sentiment is turning more positive.”
Treasury bonds also rallied, pushing yields modestly lower.
Higher oil prices had dampened enthusiasm for stocks early in the day. Expectations of a cold Thanksgiving weekend in the northeast helped send crude prices higher for a second straight day. Near-term oil futures in New York rose to $58.84 a barrel, up $1.14.
“The rise in oil prices [is] going to present a challenge to this rally,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors.
But the National Retail Federation had good news for Wall Street on Tuesday, predicting that holiday shopping could be stronger than first forecast. Among retailers, Wal-Mart Stores added 58 cents to $50.20, Sears gained $1.61 to $121.76 and Limited Brands rose 69 cents to $22.44.
The stock market will be open for a full session today; it will be open for a half session on Friday.
Among the day’s highlights:
* Among banks and mortgage lenders, Citigroup rose 41 cents to $48.92, Wachovia jumped 98 cents to $54.04, IndyMac Bancorp gained $1.18 to $39.56, Countrywide Financial added 50 cents to $36.50 and Freddie Mac rallied $1.63 to $64.08.
* An S&P; measure of home builders’ stocks surged 2.7%, with 14 of 16 members advancing, after earlier falling as much as 1.4%. Centex rallied $1.94 to $76.04, KB Home rose $2.17 to $71.70 and Pulte Homes gained $1.01 to $42.82.
* Energy stocks continued to rebound with oil prices. Occidental Petroleum rose $2.47 to $78.92 and Transocean jumped $2.24 to $64.50.
* Transportation stocks gained despite oil’s advance. The Dow transports index hit another record high, up 23.71 points, or 0.6%, to 4,180.19. Trucker J.B. Hunt rose 69 cents to $23.85 and United Parcel Service jumped $1.59 to $79.78.
* The tech sector got a lift from a rally in semiconductor stocks. Intel advanced 91 cents, to $26.16, a day after announcing a joint venture with Micron Technology to make flash-memory products that power iPod music players and digital cameras.
Annual growth in demand for such components could remain at 200% or more after 2005 and the venture wouldn’t lead to oversupply, Merrill Lynch analysts Simon Dong-je Woo and Joseph Osha said in a note. Micron added 47 cents to $14.67.
* Deere rose $4.40, or 7%, to $67.40. The world’s largest maker of farm equipment reported fiscal fourth-quarter earnings that beat estimates. The company also gave an upbeat outlook for the new year.
* PepsiCo increased 97 cents to $59.37. The maker of Frito-Lay and Doritos chips said it would buy Sara Lee’s European nuts business for $152 million.
* Procter & Gamble declined 50 cents to $57.14. The company said late Monday that it would cut prices on Pampers and Luvs diapers by an average of 3% starting in December, four months after raising them to recover commodity costs. P&G;’s U.S. market share faced “weakness” after store brands failed to lift their prices, A.G. Edwards & Sons analyst Jason Gere said.
* National R.V. Holdings soared 74 cents to $6.45, one day after receiving a takeover offer worth $6.25 a share. The Perris-based maker of recreational vehicles said it would review the offer; some investors bet on a higher bid.
* Gold continued to near the $500 mark, rising $3.60 to an 18-year high of $492.60 an ounce in futures trading. Some investors have been adding gold to their portfolios on inflation jitters.
