NEW YORK — The mere discussion of more economic stimulus from the Federal Reserve was enough to send stocks higher Tuesday. The Dow Jones industrial average rose 21 points, its third day of gains.
Minutes from the Fed’s latest policy meeting Aug. 9 showed that central- bank officials discussed a variety of options to bolster the economy, including buying more Treasury bonds. In the end, they decided to keep interest rates low at least until mid-2013.
The news that more aggressive action was being considered gave investors a reason to buy stocks.
“They want to see stimulus, and they hope stocks will go higher,” said Joseph Saluzzi, co-head of stock trading at Themis Trading.
The Federal Reserve has purchased Treasury bonds twice in the past as a way to keep long-term interest rates low. The Fed’s first bond-buying program was in 2008, at the height of the financial crisis. The second, announced last August, helped to push the Dow up 28 percent through April 29. Lower interest rates on bonds give investors an incentive to move money out of bonds and into stocks and other assets.
Stocks were mixed for much of Tuesday after an index of consumer confidence plunged in August to the lowest level since April 2009. Trading volume was also lighter than normal because many investors are on vacation.
The Dow Jones industrial average rose 20.70 points, or 0.2 percent, to close at 11,559.95 Tuesday. The Dow was down as many as 110 points five minutes after the consumer-confidence report came out at 10 a.m. EDT.
The Standard & Poor’s 500 rose 2.84 points, or 0.2 percent, to 1,212.92. The Nasdaq composite rose 14, or 0.6 percent, to 2,576.11.
The Dow’s third straight advance marked a rebound from session lows. But the rally, which drove the blue-chip average up by as much as 90 points, faded in the final minutes of the trading session, keeping the Dow in the red for the year.
“You have fundamentals and psychology fighting each other. Because of all the pessimism, market valuation is well below historical averages,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
But some analysts said the recovery in stocks had more to do with investors looking to buy beaten-down shares.
