NEW YORK — Wall Street advanced sharply Tuesday as the Federal Reserve opened a two-day meeting expected to bring another interest-rate cut to revitalize the U.S. economy.
The Fed’s rate decision is clearly the market’s focus this week, and trading has been marked by investors’ conjectures about policymakers’ thoughts on the weak economy and crunched financial industry. With an announcement not expected until this afternoon, the market in the meantime digested data on earnings, consumer spending and durable goods.
Investors did get some encouragement about the economy after the Commerce Department said orders for big-ticket items rose 5.2 percent in December, the widest jump in five months. In addition, the Conference Board reported consumer confidence fell in January — pretty much as expected.
Economic data will continue to be scrutinized as investors try to determine what the Fed’s take is on the economy. Investors are angling for a half-point cut following an emergency three-quarter-point cut last week.
“The market is just in a holding pattern,” said Todd Leone, managing director of equity trading at Cowen & Co. “It seems we’ve hit a short-term bottom, and the market has been stabilizing as we wait to hear what the Fed says.”
The Dow Jones industrial average rose 96.41, or 0.78 percent, to 12,480.30. The blue-chip index closed near its high of the day.
Broader indexes also rose. The Standard & Poor’s 500 index rose 8.34, or 0.62 percent, to 1,362.30, and the Nasdaq composite advanced 8.15, or 0.35 percent, to 2,358.06.
Government bond prices fell as stocks rose, indicating that investors feel less need for the safety of Treasurys. The 10-year Treasury note’s yield, which moves opposite its price, was at 3.66 percent, up from 3.58 percent late Monday, and rose to 3.68 percent in after-hours trading.
Rate cuts are just one part of the central bank’s plan to boost the economy. The Fed auctioned $30 billion in funds to commercial banks on Tuesday — the fourth time since last month it has provided cash-strapped banks with extra reserves.
The auction is designed to keep banks lending and prevent a severe credit squeeze from pushing the country into a recession.
Global banks have lost about $141 billion since the credit crisis began last year.
Since most investors have priced in a rate cut, the market might still continue to trend lower until the economy shows signs the Fed’s policy is working, analysts said.
“It is going to take a little time, and one thing people have to realize is that sometimes consolidation is healthy because the market can’t run forever,” said Ryan Larson, senior equity trader at Voyageur Asset Management.
