Stock indexes climb slightly
Stocks finished moderately higher in an uneven session Tuesday as optimism about the economy helped investors overcome some of their uneasiness about the Federal Reserve’s decision on interest rates.
The energy sector rose on a 5% jump in oil prices, while news that billionaire investor Carl Icahn was seeking to join Motorola’s board lifted technology stocks.
But fluctuations in the major indexes reflected the market’s uncertainty as it waits for the Fed to complete a two-day meeting today. Market watchers are expecting the central bank to keep rates unchanged as they have for the last four meetings after 17 straight hikes, because recent economic data have been showing slow, stable growth.
Now that investors have abandoned their hopes for a rate cut anytime soon, many are regarding this year’s positive economic reports and the Fed’s holding pattern as auspicious for stocks.
“If the Fed feels the economy is strong enough on its own, it means corporate earnings this year will probably be better than people were expecting,” said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc. in St. Louis.
The Conference Board, a business research group, said consumer confidence rose modestly in January as the job market remained strong. That report followed regional Fed reports Monday showing manufacturing growth in the Midwest and Texas.
The Dow Jones industrial average rose 32.53 points, or 0.3%, to 12,523.31.
Broader stock indicators were also higher. The Standard & Poor’s 500 index was up 8.20 points, or 0.6%, at 1,428.82, and the Nasdaq composite index rose 7.55 points, or 0.3%, to 2,448.64.
Bond yields slipped lower as fixed-income investors also awaited the Fed’s decision. The yield on the benchmark 10-year Treasury note fell to 4.87%, from 4.89% on Monday.
Oil prices shot higher Monday on signs of production cuts from members of the Organization of the Petroleum Exporting Countries. Crude oil futures rose $2.96 to $56.97 a barrel in New York trading. Natural gas soared more than 11% on forecasts of frigid temperatures in the Midwest.
Stock investors brushed off worries about fuel costs crimping consumers’ discretionary spending and instead focused on a possible swell in oil companies’ profits.
In other market highlights:
* Motorola rose $1.27, or 6.9%, to $19.58, after Icahn revealed his stake in the cellphone maker and expressed interest in joining its board.
* Consumer products maker Procter & Gamble said higher sales of Gillette razors and Tide detergent helped fiscal second-quarter profit jump 12%. However, shares fell 29 cents to $64.59.
* Merck shares fell 60 cents to $44.91 after the drug company posted a 58% decline in quarterly profit. It was hurt by restructuring charges and increased legal reserves linked to the withdrawal of the painkiller Vioxx.
* 3M, which makes products such as Scotch tape, had profit that jumped 58% after taking a large gain on the sale of its pharmaceutical business. However, the company -- often considered a barometer of U.S. business health because of the products it sells -- missed Wall Street expectations after stripping out that gain. Its shares fell $4.26, or 5.4%, to $74.70.
Goldman said the Dow would be about 30 points higher if it weren’t for 3M’s disappointing results. Overall, corporate earnings have been coming in fairly strong. “Fourth-quarter earnings are running 10.5% ahead of last year,” he said.
