- The Washington Times - Tuesday, December 14, 2004

NEW YORK (AP) — The Standard & Poor’s 500 and the Nasdaq Composite Index stretched to new three-year highs yesterday as investors welcomed talk of a software merger and the Federal Reserve issued a widely expected interest-rate increase.

The Fed’s Open Market Committee raised the nation’s benchmark interest rate by a quarter of a percentage point to 2.25 percent and released a statement that low inflationary pressures should allow it to continue tightening rates at a “measured” pace. The language, nearly identical to the Fed’s Nov. 10 statement, was reassuring to investors, who sent stocks up solidly after the announcement.

Wall Street had been disappointed earlier in the day by the latest reading of the nation’s trade deficit, which surged to a record $55.5 billion in October. Continued demand for Chinese imports and the high cost of oil contributed to the growing deficit, which was much larger than the $52.4 billion that economists had expected. But although the numbers looked bad from a monetary point of view, they showed continued consumer spending, which some took as a bullish sign.

The Fed’s latest move suggests “a green light for further rate increases,” said Hans F. Olsen, chief investment officer at Bingham Legg Advisers, who thinks the markets already are anticipating a series of gradual increases to at least 3 percent next year. In the near term, however, getting final rate increase of 2004 out of the way helped investors focus on other developments.

The Dow Jones Industrial Average closed up 38.13, or 0.36 percent, at 10,676.45, extending Monday’s 95-point gain for its best close since March. 1.

Broader stock indicators also strode higher, putting in their best performances since the September 11, 2001 terrorist attacks. The S&P; 500 gained 4.70, or 0.39 percent, to 1,203.38, a level it hasn’t finished at since Aug. 8, 2001. The Nasdaq rose 11.34, or 0.53 percent, to 2,159.84, its highest close since June 29, 2001.

Adding to the market’s upbeat mood, oil prices appeared to be holding steady in the $41 range. Light, sweet crude for January delivery settled up 81 cents, or 2 percent, at $41.82 per barrel on the New York Mercantile Exchange, still nearly $14 cheaper than the record settlement price of $55.17 set in October.

Buoying tech stocks, the New York Times reported that Symantec Corp. was in talks to acquire Veritas Software Corp. for $13 billion. A deal could be announced later this week, the newspaper said. Symantec tumbled $5.41, or 16 percent, to $27.45; Veritas surged $2.19, or 8.7 percent, to $27.38.

Verizon Communications Inc. shed 24 cents to $41.04 on reports that the company’s wireless arm would offer $36 billion for Nextel Communications Inc., topping Sprint Corp.’s $35 billion offer. Nextel was unchanged at $29.99, and Sprint climbed 66 cents to $25.10.

American Express Co. gained 91 cents to $55.95 after landing a major credit card distribution pact with Citigroup, part of the company’s effort to market its cards with a variety of financial institutions. Citigroup was up 10 cents at $46.87 on the news.

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