Stocks Lift Ahead of Fed Meeting
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Wall Street advanced today as investors undeterred by record oil prices speculated that the Federal Reserve will cut interest rates later this week to boost the slow economy and lure more buyers into the troubled credit markets.
The Fed begins its two-day meeting tomorrow, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September for the first time in four years after the credit markets seized up and posed the threat of recession. The economy has a hard time growing if companies can’t borrow and lend money.
But with energy prices soaring to new records, the risk of inflation — which tends to accelerate when rates are low — may give policy makers some pause. Crude oil futures soared above $93 a barrel for the first time on the New York Mercantile Exchange today after a storm led Mexico’s state oil company to suspend about a fifth of its oil production.
The Fed remains concerned about inflation but is likely to lower the target federal funds rate by a quarter-point due to overriding credit worries, an equity strategist for A.G. Edwards & Sons, Scott Wren, said.
“It’s kind of a psychological sort of move,” Mr. Wren said. “A 25 basis-point cut isn’t going to ease the credit crunch. But it’ll give the Fed a little more time to figure out what’s going on with the economy.”
According to preliminary calculations, the Dow Jones industrial average rose 63.56, or 0.46%, to 13,870.26.
Broader stock indicators also gained. The Standard & Poor’s 500 index rose 5.70, or 0.37%, to 1,540.98, while the Nasdaq composite index rose 13.25, or 0.47%, at 2,817.44.
Treasury bond prices rose modestly as bond investors grew more cautious in their rate expectations. The yield on the 10-year Treasury note, which moves inversely to the price, slipped to 4.38%, from 4.41% late Friday.
The dollar was mixed against rival currencies, while gold prices rose.
Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80.
