Stocks Climb after Fed Pledges to Hold Rates Low
March 17, 2010 - 2:02 PMThe stock market continued its steady advance of the past month after the Federal Reserve said it would keep interest rates low to revive the economy.
The Dow Jones industrial average rose 75 points in afternoon trading for its seventh straight advance. The gain means the Dow has joined the Standard & Poor's 500 index and Nasdaq composite index in reaching levels not seen since 2008.
The latest climb came from the Fed's decision Tuesday to hold its key lending rate at a record low of essentially zero. A government report that prices at the wholesale level fell by the biggest amount in seven months added to confidence that inflation is contained. That would enable policymakers to keep rates low.
The Labor Department's Producer Price Index fell 0.6 percent in February, its steepest drop in seven months. Economists polled by Thomson Reuters forecast a drop of 0.2 percent. A drop in energy prices helped push the index lower.
The report was the latest bit of news to build confidence about the economy. It's clear that investors are feeling more upbeat. Since Feb. 8, the Dow is up 7.9 percent. That's a big gain that might ordinarily take a year to assemble but the Dow had slumped 7.6 percent in the month before that so a rebound isn't surprising.
Analysts are focusing not on the size of the gain but the way the market is climbing: in almost a stairstep pattern. The Dow hasn't swung by more than 100 points in 11 of the past 13 trading days.
The more modest advances signal that investors aren't getting overconfident.
"This market is behaving just the way you like to see," said James Meyer, chief investment officer at Tower Bridge Advisors in Conshohocken, Pa.
Meyer said investors are cautious but relieved as big problems like unemployment and housing appear to be getting better, even if the improvement is slow. Most reports signal that the economy is recovering. The occasional bursts of good news have helped overshadow some of the more downbeat economic numbers.
The climb continued Wednesday. In midafternoon trading, the Dow rose 78.90, or 0.7 percent, to 10,764.88. The Dow traded above its recent closing high of 10,725.43 from Jan. 19 and is at its highest level since Oct. 1, 2008.
The S&P 500 index rose 9.77, or 0.8 percent, to 1,169.23, while the Nasdaq rose 20.11, or 0.9 percent, to 2,398.11.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged at 3.66 percent from late Tuesday.
The dollar fell against other major currencies. Gold prices rose.
Crude oil rose $1.10 to $82.80 per barrel on the New York Mercantile Exchange.
Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 572.7 million shares compared with 526.7 million shares traded at the same point Tuesday.
The Russell 2000 index of smaller companies rose 6.82, or 1 percent, to 686.40.
Britain's FTSE 100 gained 0.4 percent, Germany's DAX index rose 9 percent, and France's CAC-40 climbed 0.5 percent. Japan's Nikkei stock rose 1.2 percent.
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