New York – Wall Street shot higher Wednesday, sending the Standard & Poor’s 500 index to its first record close in more than seven years as investors grew more confident that the Federal Reserve might cut interest rates in the second half of 2007. The Dow Jones industrials also reached a record close.
The S&P 500, considered by traders as the best barometer of U.S. stocks, surpassed the record of 1,527.46, set March 24, 2000, at the peak of the dot-com boom, closing at 1,530.23, up 12.12, or 0.80 percent.
The index of 500 of the nation’s biggest companies was powered by investors’ relief over the minutes from the Fed’s May 9 meeting of its Open Market Committee.
The central bankers called inflation “uncomfortably high,” a stance that made it less likely that the Fed would act to cut interest rates.
However, analysts said the Fed indicated that the economy will continue to accelerate – and that raised the possibility that the Fed hasn’t ruled out lowering rates. The Fed has left rates unchanged at 5.25 percent for seven straight meetings.
“Wall Street took the (meeting’s) minutes to mean that later on this year there will be more of a chance for a rate cut, and people rallied on that,” said Ryan Larson, equity trader at Voyageur Asset Management. “It put a cut back on the table, and that’s what led to these record index closes.”
The S&P 500, which crossed its closing record May 21 and then retreated, remains below its all-time trading high of 1,552.87, also reached in March 2000.
The Dow, the first of the major market indexes to recover from Wall Street’s prolonged slump in the early part of the decade, closed at 13,633.08, up 111.74, or 0.83 percent, and also reached a new trading high of 13,636.09.
By comparison, the Nasdaq isn’t expected to reach its closing high of 5,048.62, set March 24, 2000, soon. The tech-dominated index closed up 20.53, or 0.80 percent, at 2,592.59.
The record close for the S&P and Dow came after the markets opened sharply lower following a pullback in the often- volatile Chinese stock markets. But investors remained resilient and pushed stocks higher after determining China’s problems were likely contained and found little reason for pessimism from the Fed’s comments.
The S&P’s advance is of greater significance to many investors than the record closes the Dow has achieved since October.
There are more investments that track the S&P 500; such funds are an integral part of many retirement plans.
