Stocks get a lift in advance of Fed meeting
Wall Street ended modestly higher Monday as investors awaited today’s meeting of Federal Reserve policymakers.
The Fed is expected to leave its benchmark short-term rate unchanged at 5.25%, but investors will be paying close attention to the central bank’s wording in its post-meeting statement.
In other trading, the dollar resumed its decline against the euro after former Fed chief Alan Greenspan said he expected an extended slide for the U.S. currency.
Major stock market indexes got a lift in part from rumors of another round of corporate takeovers.
Mergers help assure investors that companies are optimistic enough about the economy to do deals, analysts said.
About $45 billion worth of acquisitions were announced by Standard & Poor’s 500 companies last week, setting up this year to be the best for takeover activity since 2000.
On Monday the S&P; 500 index added 3.20 points, or 0.2%, to 1,413.04, near the six-year closing high of 1,414.76 reached a week earlier.
The 30-stock Dow Jones industrial average rose 20.99 points, or 0.2%, to 12,328.48. Its record closing high was 12,342.56 on Nov. 17.
The Nasdaq composite index rallied 5.50 points, or 0.2%, to 2,442.86.
Winners topped losers by 3 to 2 on the New York Stock Exchange but had only a narrow edge on Nasdaq.
The Dow was helped by American International Group, which added 65 cents to $71. The insurance giant agreed to buy the U.S. port operations of state-owned Dubai Ports World.
In the broader market, Biomet jumped $1.64 to $41.54 on a report that Britain-based Smith & Nephew might bid $11 billion to acquire the medical device maker. There was also speculation that a competing offer might be made by Johnson & Johnson, which slipped 25 cents to $65.70.
Deal speculation also drove travel reservation firm Sabre Holdings up $2.11 to $30.43.
And in the airline sector, Continental Airlines soared $3.44 to $45.42, its highest since 2001, amid rumors that the company could be a target of rival UAL, parent of United Airlines. UAL rose $1.59 to $44.53.
In the Treasury bond markets, yields fell after rising sharply Friday, when the government reported stronger-than-expected U.S. job growth in November.
The yield on the 10-year Treasury note, which jumped from 4.48% on Thursday to 4.55% on Friday, eased to 4.52% in anticipation of the Fed’s meeting.
Investors are eager to see whether the Fed softens its recent hawkish tone about interest rates. Chairman Ben S. Bernanke and other officials have warned that they are concerned about inflation and will not rule out raising interest rates, even though they have held the key rate steady since June.
“I’m looking to see if they would acknowledge some of the recent weakness” in the economy or “continue to focus on inflation,” said David Coard, head of fixed-income trading at Williams Capital Group in New York.
In other trading, the euro climbed to $1.325, up from $1.32 on Friday, after Greenspan warned investors to expect “a few years of dollar weakness.”
The remarks from the former Fed chief, who addressed a business conference in Tel Aviv via video-link, triggered renewed buying of the euro, which shot as high as $1.334 last week, its highest level in more than a year.
The euro has gained at the dollar’s expense recently as some currency traders have focused on better-than-expected economic data in Europe and rising short-term interest rates there.
Also, a number of central banks, including China’s, have hinted that they expect to further diversify their investment holdings to reduce reliance on dollar-denominated securities.
Greenspan said he believed it was “imprudent to hold everything in one currency,” a nod to the trend of central bank reserve diversification.
In commodity trading, near-term oil futures in New York fell 81 cents to $61.22 a barrel.
Among the day’s market highlights:
* Airline shares moved broadly higher along with Continental. AMR, parent of American Airlines, gained 45 cents to $33.50. Southwest added 26 cents to $15.86 and Alaska Airlines rose 76 cents to $39.16.
* Supermarket stocks attracted buyers. Safeway, parent of Vons, jumped 91 cents to $32.46, its highest since 2002. Kroger, parent of Ralphs, rose 64 cents to $23.71.
* Time Warner rallied 42 cents to $21.33, continuing its recent surge, after the stock was upgraded by Prudential Securities to “overweight” from “neutral weight.” The brokerage cited the outlook for the company’s cable assets.
* Boeing fell 35 cents to $89.78 despite announcing a 17% increase in its cash dividend.
* India’s Sensex stock index slumped nearly 3%, its biggest drop in three months, after the nation’s central bank made a move to tighten credit in the banking system. The index has zoomed 43% this year amid a booming economy.
