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Stocks snap higher on hopes for new Fed action
NEW YORK (AP) — Stocks rose sharply on Wall Street on Tuesday as traders turned their focus back to corporate news from the United States and hopes that the Federal Reserve will come up with a plan to jump-start the economy. Banks and materials stocks led the market higher.
The Dow Jones industrial average rose 103 points to 12,845 in afternoon trading, its highest level in a month. The Dow was headed for its third triple-digit gain in the past four trading days.
Microsoft was one of the biggest gainers in the Dow. The stock jumped 4 percent after the company announced a new tablet computer called Surface to compete with the immensely popular iPad from Apple. Microsoft was up $1.14 at $30.98.
The other top-performing stocks in the Dow were financial companies: Bank of America rose 5 percent, JPMorgan Chase was up 2.7 percent, and American Express gained 2 percent.
Traders are latching onto recent signals from the Federal Reserve that the central bank may reveal plans to stimulate the economy at the end of its two-day meeting, which started Tuesday.
“A good portion of today’s strong market action is from a hope factor that we’re going to get more easing from the Fed,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
Economists say that even if the Fed does not act after its meeting, it will send a clear message that it is standing by to do so if needed.
There were also signs that the housing market is healing. American builders broke new ground on more single-family homes in May and requested more permits to build homes and apartments than they have in the past 3½ years.
The Commerce Department also said April was much better for housing starts than first thought. The government revised up the figures to 744,000, the fastest building pace since October 2008.
Material stocks rose on the prospect of demand from home construction. United States Steel rose 6 percent, and Freeport-McMoran Copper rose 3 percent.
In other trading, the Standard & Poor’s 500 index rose 13 points to 1,357. All the 10 industry groups in the S&P were up. The technology-heavy Nasdaq composite index rose 33 points to 2,928.
European markets rose sharply after borrowing costs eased for Spain and Italy. Spain’s benchmark 10-year bond yield fell below the key 7 percent level to 6.99 percent, and Italy’s fell 0.04 percentage point to 5.79 percent.
Spain’s IBEX 35 index rose 2.7 percent, while Germany’s DAX added 1.8 percent and France’s CAC-40 rose 1.7 percent.
Spain raised $4.28 billion in an auction of 12- and 18-month bills, more than analysts had expected. However Spain’s cost to raise the money skyrocketed. The Spanish government had to pay an interest rate of 5.07 percent for the 12-month bills, up sharply from 2.98 percent at the last such auction on May 14.
Still, investors were heartened to see that people were willing to lend Spain money.
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