Stocks swung back into action Wednesday after a two-day retreat as the U.S. Federal Reserve’s optimistic comments at the end of a two-day meeting re-energized investors and bolstered hopes that the recession is finally easing. The Central Bank’s observation that the economy appears to be “leveling out” was optimistic but its subdued outlook on unemployment and inflation took some sheen off that optimism. The Fed also announced plans to slow the pace of its program to purchase $300 billion worth of Treasury bonds, adding the full amount will be bought by October.
The 30-stock Dow Jones industrial average finished 120 points, or 1.3%, higher. The broad S&P 500 index rose 11 points, or 1.1%. The tech-heavy NASDAQ composite advanced 29 points, or 1.5%. On the New York Stock Exchange 1.23 billion shares exchanged hands and advancing stocks outpaced those that fell five-to-two.
Stocks seesawed after the Fed’s announcement, with the indexes jumping to new 2009 highs, but pared some gains as the session neared its close. Crude prices added 1% to $70.16, despite the rise in US crude stockpiles, on the FOMC’s improved take on the economy.
In another positive development, the US trade deficit widened by a less-than-expected $27 billion in June, with exports up 2% on increased demand for semiconductors and aircraft engines, and imports up 2.3% due to higher oil costs. Energy issues rose 1.3%. Exxon Mobil Corp. (NYSE:XOM) rose 1.4% to $69.11 and Schlumberger Ltd. (NYSE:SLB), the world’s largest oilfield-services provider, increased 1.9% to $53.88.
Yesterday, nine of the ten S&P industry sectors advanced. Industrials and financials led the gainers, both rising 1.8%. Among DJIA components, United Technologies (NYSE:UTX) jumped 4.3% and Caterpillar (NYSE:CAT) advanced 2.8%. Technology shares rose 1.7%. Among financial issues, Travelers (NYSE:TRV) shares rose 3.3% after S&P raised its outlook on the firm to “positive” from “stable.” Allstate Corp. jumped 6.3% after Bank of America (NYSE:BAC) upgraded the stock to “buy.” Homebuilders showed strength with shares of Toll Brothers (NASDAQ:TOLL) jumping 14% after the company reported third-quarter orders rose 3% from last year, versus consensus estimates of a double-digit decline.
Today’s markets are expected to add to yesterday’s gains in front of reports on retail trade (expected to have gone up 0.8% in July) and several retailers’ results, and an expected modest drop in weekly jobless claims. Walmart’s (NYSE:WMT) results posted better than expected despite the impact of a strong US dollar on international sales and the impact of last year’s government stimulus checks. Earnings also topped Street estimates at Kohl’s (NYSE:KSS). Macy’s (NYSE:M) beat analysts’ projections yesterday with an improved 2009 outlook.