Stocks gain as investors await Fed decision
EmptyNEW YORK -- Stocks rose in a quiet session Wednesday as investors awaited the results of the Federal Reserve's two-day meeting on interest rates and cheered a better than expected reading on third-quarter growth.
The Commerce Department said the country's gross domestic product grew at an annual rate of 3.9% in the third quarter, a faster pace than the 3% growth economists forecast, on average. The report may have calmed some investor concerns about the economy's health ahead of the Fed's rate decision.
In another economic reading, construction spending had its best showing in four months.
Wall Street widely expects the Fed to cut its benchmark federal funds rate by a quarter point. Although oil is hovering near an all-time high, and inflation remains a concern, the central bank has indicated that tighter credit conditions and a housing slump pose a threat to economic growth. The Fed could lower rates to stimulate business activity amid the turmoil.
Last month, the Fed surprised the market with a larger-than-expected half-point cut in the funds rate. The funds rate stands at 4.75%.
The GDP reading shows "the economy is on potentially stronger footing than we had thought," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. He said that after a pullback in the prior session, trading was somewhat muted Wednesday ahead of the Fed's decision.
"We're probably going to go sideways," he said, adding that some investors tend to sell ahead of the announcement. "This market is so short-term focused."
In late morning trading, the Dow Jones industrial average rose 48.12, or 0.35%, to 13,840.59.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 8.94, or 0.58%, to 1,539.96, and the Nasdaq composite index rose 14.39, or 0.51%, to 2,831.10.
Treasury bond prices fell after the economic readings and ahead of the Fed decision. The yield on the 10-year Treasury note, which moves inversely to its price, rose to 4.42% from 4.38% late Tuesday.
Investors are also watching economic data as they try to make last-minute predictions on the Fed's next move. A Commerce Department report showed construction spending increased 0.3% in September. Spending on commercial construction and for government projects made up for weakness in home building.
The Chicago purchasing managers index of manufacturing activity in the Midwest showed a decline, falling to 49.7 for October from 54.2 a month earlier. A reading below 50 signals a contraction in activity. The index is seen as a harbinger of the national Institute for Supply Management report, to be released Thursday.
Beyond economic indications, third-quarter earnings are still flowing in.
Packaged foods company Kraft Foods Inc. rose 63 cents to $33.24 after reporting its profit fell 20% in the third quarter due to a gain in the prior quarter and higher dairy costs.
Auto parts maker Visteon Corp. narrowed its loss in the third quarter as cost-cutting tied to its restructuring effort helped offset lower revenue. Visteon rose 39 cents, or 4.1%, to $6.25.
Beyond earnings news, shares of Google Inc. crossed $700 for the first time Wednesday as investors grew optimistic that the Internet search leader will continue to boost profits as it pushes into new markets. Google shares, which recently rose $6.22 to $700.99, took less than a month to jump from $600 to $700.
In commodities, oil prices jumped $2.58 to $92.96 a barrel on the New York Mercantile Exchange after the government reported an unexpected drop in crude oil inventories for the second week in a row. Gold prices rose, while the dollar was mixed against other major currencies.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 376.4 million shares.
The Russell 2000 index of smaller companies rose 3.10, or 0.38%, to 819.25.
Overseas markets mostly moved higher. Britain's FTSE 100 rose 0.19%, Germany's DAX index added 0.13, and France's CAC-40 gained 0.46%. Japan's Nikkei stock average rose 0.52%, while Hong Kong's Hang Seng index fell 0.90%.