NEW YORK – Stocks rose modestly today, nudging the Dow Jones industrials to a new trading high as Wall Street traded optimistically ahead of the Federal Reserve’s decision on interest rates.
Investors who widely expect the Fed’s Open Market Committee to leave interest rates unchanged, as it has done since last summer, are more concerned with the central bank’s economic assessment.
Wall Street hopes the Fed’s statement will indicate it is not inclined to raise rates to curb inflation, which would make access to capital more expensive and potentially hurt the stock market.
The committee releases its statement at 2:15 p.m. Eastern time.
The current interest rate environment is an ideal one for stocks, and recent inflation gauges have indicated that costs are not out of control – so unless the bank says something very unexpected, there’s no reason the market can’t continue on its upward climb, said Steven Goldman, chief market strategist at Weeden & Co.
“All in all, the market’s gains are not likely to be sidetracked with the comments from the Fed. There might be some gyrations, but they won’t be long-lasting,” said Goldman. “The markets tend to react better with a favorable monetary backdrop, and that’s what we’re witnessing.” Also pleasing investors was speculation about a possible takeover bid by mining company BHP Billiton Ltd. for rival Rio Tinto Group, and a government report that showed that after three months of declines, the nation’s gasoline inventories rose last week. If they keep increasing, fuel costs for U.S. drivers are likely to deflate.
In early afternoon trading, the Dow rose 28.44, or 0.21 percent, to 13,337.51, after reaching a trading high of 13,344.34. The blue chip index closed slightly lower Tuesday, after hitting its 20th record close this year on Monday.
Broader stock indicators were mixed. The Standard & Poor’s 500 index was up 1.72, or 0.11 percent, at 1,509.44. Last week, the S&P 500 moved above the 1,500 level for the first time in nearly seven years, bringing the index near its closing high of 1,527.46 reached March 24, 2000.
The technology-dominated Nasdaq composite index declined 2.31, or 0.09 percent, to 2,569.44. The Nasdaq was weaker than the other major stock indexes after disappointing news from companies including Dendreon Corp., Cisco Systems Inc. and Electronic Arts Inc.
Bonds were unchanged, as investors stayed in the sidelines ahead of the Fed’s decision. The yield on the benchmark 10-year Treasury note was at 4.64 percent, the same as late Tuesday.
The dollar declined against other major currencies, and gold prices also fell.
Crude oil prices fell $1.25 to $61.01 a barrel on the New York Mercantile Exchange, after the U.S. government reported that the nation’s gasoline stockpiles increased. Gas prices at the pump are still, on average, above $3 a gallon.
