- The Washington Times - Thursday, February 15, 2007

NEW YORK (AP) — Wall Street extended its February rally yesterday, growing confident that interest rates will hold steady even as Federal Reserve Chairman Ben Bernanke tempered his forecast of slowly cooling growth and inflation with a reminder that price pressures remain a concern.

The Dow Jones Industrial Average stretched its three-day advance to more than 200 points, the first such jump since Aug. 15-17 last year, and had its second straight record close. The rally, triggered Tuesday by signs of an uptick in mergers and acquisitions, was given new life yesterday by a report that the world’s two largest beer makers, InBev SA and Anheuser-Busch, are considering joining forces.

The takeover talk coupled with Mr. Bernanke’s testimony to Congress have helped send stocks soaring. Mr. Bernanke’s comments yesterday were similar to those of a day earlier, but he added that inflation could once again pick up, which reminded investors that a rate increase isn’t out of the question. That note of caution limited the market’s climb.

The prospect of a rate increase looked pretty dim, however, after most of the economic reports released yesterday. The reports showed a big increase in unemployment claims last week, a huge drop in industrial output in January caused by large cutbacks and layoffs in the auto industry, and weaker-than-expected manufacturing in the Philadelphia region.

“The Fed is still data driven, so we will be looking at the data in the ensuing months,” said Jim Herrick, manager of equity trading at Baird & Co. “There’s a strong possibility we’ll continue this uptrend.”

Also boosting the market were a stock buyback by Caterpillar Inc., an analyst upgrade of chip maker Qualcomm Inc., and Boeing Co. finalizing an order from United Parcel Service Inc. for 27 cargo planes.

The Dow Jones Industrial Average climbed 23.15, or 0.18 percent, to a record close of 12,765.01, after reaching a new trading high of 12,779.03.

Broader stock indicators also were higher. The Standard & Poor’s 500 Index rose 1.51, or 0.10 percent, at 1,456.81, and the technology-laden Nasdaq Composite Index increased 8.72, or 0.35 percent, at 2,497.10.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.71 percent from 4.74 percent late Wednesday.

The Federal Reserve reported yesterday that output at U.S. factories, mines and utilities was down 0.5 percent in January, the largest amount in 17 months, and the Labor Department reported that the four-week moving average of the number of newly laid-off workers rose to its highest level in nine weeks.

Also yesterday, the Philadelphia Fed survey showed near-flat manufacturing activity in that region, and the first drop in employment in more than three years. The report, which would help make the case for at least stable interest rates, did not have a big effect on bond trading.

The dollar was mixed against other major currencies, while gold prices slipped slightly.

Oil prices fell a penny to settle at $57.99 a barrel on the New York Mercantile Exchange, stemming a tumble begun a day earlier by a smaller-than-expected decrease in U.S. heating oil inventories and forecasts of warmer weather to come in the Northeast.

Financial results from oil services provider Baker Hughes Inc. that missed analysts’ expectations pressured some companies in the energy sector. Baker Hughes fell $6.62, or 9.2 percent, to $65.32.

But overall, stocks performed well yesterday, especially as hopes for an uptick in takeover activity were reinvigorated when it was reported that InBev had held preliminary merger talks with Anheuser-Busch.

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