Rate-Cut Hopes Lift Stocks

Updated from 4:07 p.m. EST

Stocks closed higher again Tuesday as two government reports suggesting a cooling economy gave Wall Street hope that the Federal Reserve might start considering rate cuts.

The Dow Jones Industrial Average gained 47.75 points, or 0.39%, to 12,331.60, and the S&P 500 was up 5.64 points, or 0.4%, at 1414.76. The Nasdaq Composite rose 3.99 points, or 0.16%, to 2452.38.

"This is a very powerful rally that can absorb a lot of bad news," said Ken Tower, chief market strategist with CyberTrader. "It seems to me that one should either buy strength and try to outperform the overall market, or buy the market average."

About 2.31 billion shares changed hands on the New York Stock Exchange. Advancers beat decliners by a 5-to-3 margin. Volume on the Nasdaq was roughly 2.05 billion shares, with winners and losers even.

By sector, housing stocks were the best performers of the session. The Philadelphia Housing Sector Index rose 2%. Metal stocks were among the few losers, with the Philadelphia Gold & Silver Index easing 1.2%.

Before trading began, the Labor Department said third-quarter unit labor costs, a key measure of inflation, rose only 2.3%, well below the preliminary estimate of 3.8%. Productivity showed a 0.2% increase, above the previous read of no growth.

Shortly after the open, the Commerce Department said factory orders for October fell 4.7%, more than the 4.5% decline that had been anticipated. Orders for September were revised lower. Last week, two other reports pointed to sluggishness in the manufacturing sector.