NEW YORK (AP) — Wall Street made a moderate advance yesterday as investors welcomed signs that the Federal Reserve might be close to ending its string of interest rate increases.
While the Fed raised interest rates a quarter percentage point to 4.25 percent, the market was pleased by a revision to the central bank’s economic assessment in which it no longer characterized its rate increases as accommodative. That change was widely seen as an adjustment in Fed monetary policy.
Analysts had been expecting the Fed’s decision — the 13th consecutive rate increase in 18 months — and many anticipate one more boost at outgoing Chairman Alan Greenspan’s final policy-making meeting in January.
But recent reports of strengthening economic indicators now have some concerned that more increases could be in store, and that may have limited the market’s advance following the Fed’s midafternoon announcement. The Fed previously slashed rates to record lows to spur the economy, and has been gradually pushing them upward to keep inflation in check.
“At this point, it’s difficult to see them stopping with one more [increase],” said Christoper Piros, investment strategist for Prudential’s Strategic Investment Research Group. “There will almost certainly be two more. But I do think there is a risk they may have already gone far enough, if not too far.”
Stocks wandered aimlessly for most of the session as the market weighed lackluster retail sales figures and mixed earnings news from electronics retailer Best Buy Co., computer maker Hewlett-Packard Co. and consumer products firm Procter & Gamble Co.
At the close of trading, the Dow Jones Industrial Average gained 55.95, or 0.52 percent, to 10,823.72. The Dow opened the session in negative territory and surged 103 points after the Fed announcement.
Broader stock indicators ended higher. The Standard & Poor’s 500 Index rose 7.00, or 0.56 percent, to 1,267.43, and the Nasdaq Composite Index advanced 4.05, or 0.18 percent, to 2,265.00.
Bonds rose after the Fed’s rate decision, with the yield on the 10-year Treasury note sliding to 4.52 percent from 4.55 percent late Monday. The dollar was mixed against other major currencies in European trading, while gold prices pulled back from recent highs.
Oil prices were flat after a brisk run-up Monday as another snowstorm approached the Northeast, with a barrel of light crude adding 7 cents to settle at $61.37 on the New York Mercantile Exchange.
The Commerce Department said retail sales grew 0.3 percent in November, just missing estimates of 0.4 percent. Slowing sales at department and specialty stores roused concerns about the strength of the critical holiday shopping season.
However, the report did show that auto sales rebounded after a three-month decline, while gasoline sales fell as prices pulled back from record levels. Excluding autos, retail sales dropped 0.3 percent, the biggest loss in 19 months.
Separately, the department reported business inventories expanded by 0.3 percent last month, but that sales climbed 0.8 percent. A lower inventory-to-sales ratio urges companies to boost production and hiring.
Among the Dow industrials, support from P&G, Pfizer Inc. and Boeing Co. was limited by a disappointing update at HP, which also pulled down International Business Machines Corp.
P&G climbed $1.48 to $58.39 after raising its second-quarter profit target, citing better sales and less-than-expected costs from its acquisition of Gillette Co. News of quarterly dividend increases lifted Pfizer by $1.37 to $22.31, and Boeing by 40 cents to $70.59, off its all-time high of $70.94.
But those gains were countered when HP forecast its 2006 revenue and earnings just shy of Wall Street views. HP sank 90 cents to $29.07, and rival IBM fell $2.25 to $83.71.
Advancing issues led decliners by 6 to 5 on the New York Stock Exchange, where preliminary consolidated volume of 2.46 billion shares topped the 1.92 billion shares that changed hands Monday.