Stocks up after Fed minutes released
EmptyNEW YORK -- Wall Street advanced sharply Tuesday as investors interpreted minutes from the Federal Reserve’s last meeting as indicating the central bank is ready to keep cutting interest rates to boost the economy. The Dow Jones industrial average rose 120 points to a new record close.
The minutes from the Federal Open Market Committee’s Sept. 18 meeting, when Fed governors voted unanimously to cut rates a half percentage point, also showed that officials were concerned that the weakness in the dollar could lead to higher inflation. But the Fed -- signaling it is more willing to intervene -- also said that the economic outlook was uncertain because of the summer’s credit crisis, and that there were still risks to growth that justified lower rates.
The major indexes were little changed just before the minutes came out, and then rose sharply. Investors were hoping that the Fed would lean toward future rate cuts; central bankers will meet again Oct. 30-31.
“This adds fuel to the fire that the Fed is going to try and reinvigorate the economy with further cuts, and that’s what they are committed to,” said Richard E. Cripps, chief market strategist for Stifel Nicolaus. “The likelihood of having a second cut either this month or at the December meeting seems greater than before the minutes.”
Further, Federal Reserve Bank of St. Louis President William Poole said during a speech Tuesday that he believes the financial markets are “still fragile” from weakening credit conditions, but that it appears to be stabilizing. He pointed out that the fallout in the subprime mortgage sector, where mortgages are issued to homebuyers with poor credit, was one of the catalysts to financial market turmoil
According to preliminary calculations, the Dow rose 120.80, or 0.86%, to 14,164.53, eclipsing the previous record close of 14,087.55 reached Oct. 1. The Dow had a new trading high as well, rising to 14,166.97.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 12.57, or 0.81%, to 1,565.15, and the Nasdaq composite index rose 16.54, or 0.59%, 2,803.91.