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Stocks close higher as investors parse Fed’s next move

Inside the New York Stock Exchange
Traders work the floor of the New York Stock Exchange.
(Getty Images)

Stocks in the U.S. bucked a global market slump Thursday as investors look ahead to a crucial Federal Reserve meeting next week on interest rates.

Investors pushed major U.S. indexes lower in the morning following drops in Asia and Europe, then reversed course as oil prices rose. That helped send shares of energy companies, which have been battered in recent weeks, higher.

Traders remain focused on a two-day meeting of Federal Reserve policymakers next week. They are trying to anticipate when and how quickly the central bank will begin to raise interest rates from their historically low levels. Those low rates have been a key factor sending stock prices higher over the past seven years.

A report Thursday showing a decline in applications for unemployment claims was the latest bullish sign on the job market, which could prompt the Fed to tighten credit. Some say worries about higher rates are overblown.

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“The U.S. economy is in significantly better shape than in the past,” said Mike Ryan, chief investment strategist at UBS Wealth Management Americas. “We’re not dependent on Fed largess and stimulus to support growth.”

The Dow Jones industrial average rose 76.83 points, or 0.5 percent, to close at 16,330.40. The Standard & Poor’s 500 index gained 10.25 points, or 0.5 percent, to 1,952.29. The Nasdaq composite climbed 39.72 points, or 0.8 percent, to 4,796.25.

Global markets have been moving sharply up and down in recent weeks as investors worry about a slowdown in China, plunging currencies in developing countries like Malaysia and uncertainty over the Fed’s next move. In five of the six previous days of trading in September, the S&P 500 has made big moves both up and down, including a surge of 2.5 percent on Tuesday and a plunge of 3 percent on the first day of the month.

Trading was relatively light on Thursday, with little news moving prices one way or the other.

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Apple jumped $2.42, or 2.2 percent, to $112.57, on Thursday, a day after the company introduced updated versions of the iPhone, Apple TV and iPad. Technology stocks rose 1 percent overall, the biggest gain among the 10 industry sectors of the S&P 500.

The price of oil rose sharply after the Energy Department reported a strong increase in U.S. gasoline demand.

A report on unemployment claims early Thursday showed fewer Americans applied for benefits last week, adding to recent evidence of robust hiring. The Labor Department said weekly applications benefits dropped 6,000 to 275,000.

A separate government report the day before said U.S. job openings jumped to the highest level in 15 years in July. A report last week showed the U.S. unemployment rate fell to a seven-year low of 5.1 percent in August.

Investors are not so sure they like the healthier economy because it could mean the Fed raising rates sooner, and faster, than anticipated.

“The Fed has to be mindful of all this job creation because, sooner or later, companies are going to have to compete for workers, and they’re going to compete by raising wages,” said David Joy, chief market strategist at Ameriprise Financial. “That will filter into the Fed’s deliberations next week.”

In Asia, Japan’s Nikkei 225 slumped 2.5 percent after surging 7.7 percent on Wednesday in its biggest gain since October 2008. Hong Kong’s Hang Seng index dropped 2.6 percent and China’s Shanghai Composite Index finished 1.4 percent lower.

European markets were mostly lower. France’s CAC-40 lost 1.5 percent.

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Among U.S. stocks making big moves:

— Krispy Kreme Doughnuts plunged $2.08, or 12 percent, $15.65 after the company lowered its outlook following disappointing second-quarter results.

— Lululemon Athletica sank $10.51, or 16 percent, to $53.54 after the high-end apparel maker predicted profits for the current quarter that were lower than Wall Street analysts were expecting.

— Freight company Con-Way soared $12.01, or 34 percent, to $47.54 after agreeing to be acquired by XPO Logistics.

U.S. crude rose $1.77 to close at $45.92 a barrel in New York. Over the past four weeks, U.S. gasoline demand averaged 9.3 million barrels per day, up 3.8 percent compared with the same period last year, according to the Energy Department’s weekly petroleum status report. Brent crude, a benchmark for international oils used by many U.S. refineries, rose $1.31 to close at $48.89 a barrel in London.

In other futures trading on the NYMEX:

— Wholesale gasoline rose 3.4 cents to close at $1.394 a gallon.

— Heating oil rose 3.6 cents to close at $1.575 a gallon.

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— Natural gas rose 3.2 cents to close at $2.683 per 1,000 cubic feet.

Bond prices fell slightly. The yield on the 10-year Treasury note rose to 2.22 percent from 2.20 percent late Wednesday. The U.S. dollar rose to 120.62 yen from 120.28 yen. The euro rose to $1.1285 from $1.1219.

The price of gold rose $7.30 to $1,109.30 an ounce. Silver rose 7 cents to $14.65 an ounce and copper gained a penny to $2.45 per pound.


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