Stocks Tough It Out
Updated from 4:05 p.m. EST
Stocks closed higher in volatile trading Tuesday, as the Fed kept interest rates unchanged at 1% while continuing to say it could be patient about policy changes.
The Dow led the way, gaining 81.78, or 0.81%, to 10,184.67, thanks partly to 3M's (MMM) 5% gain. The S&P 500 added 6.21, or 0.56%, to 1110.70, and the Nasdaq was up 3.88 points, or 0.2%, to 1943.08 after losing much of an early 1% gain.
Volume on the New York Stock Exchange approached 1.5 billion shares, where advancers outnumbered decliners by about 5 to 4. Almost 2 billion shares changed hands on the Nasdaq, where decliners had a slight edge on advancers.The 10-year Treasury note gained 20/32, with the yield down to 3.69%, after being down before the Fed's statement. Crude oil and gold prices were even on the day. "The only slight difference in this Fed statement was that they did give some credence to the fact that companies are not hiring and employment is lagging here," said Paul Mendelsohn, a chief investment strategist with Windham Financial Services who sees a variety of factors working against the stock markets now. Mendelsohn pointed to high oil prices, renewed fears related to terrorism -- coupled with al Qaeda's apparent ability to influence the election process in Spain -- and uncertainty about the permanence of the Bush tax cuts as all being negatives. "The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity," said the Fed in its policy statement. "With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation." "This was pretty much a nonevent," said John Hughes, an equity strategist at Shields & Co. "Rates are low. They're going to stay low for a while. There's no sign that anything is really different, or that they're going to raise rates, and stocks are basically where they were before the announcement." Although no action on interest rates was expected, investors were looking for any changes in the Federal Open Market Committee's assessment of the economy following February's weak employment report, and the statement did say that "new hiring lagged." The Fed's last policy statement roiled the markets when it dropped its commitment to keep rates on hold for a "considerable period," saying instead that it could be "patient" about removing its policy accommodation. Prior to the Fed's decision, afternoon trading had been buffeted by various terror-related rumors circulating on trading desks, none of which appeared to bear out. Weakness in Oracle (ORCL) and Microsoft (MSFT) contributed to the Nasdaq's deterioration, but both stocks ended slightly higher.
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