Posted on: Wednesday, September 22, 2004
Stocks bounce up as Fed meets expectations
By Meg Richards
Associated Press
NEW YORK — Stocks dashed higher yesterday as investors welcomed strong earnings from financial services companies, upbeat economic data and reassurance from the Federal Reserve.
"I think it's basically a pretty positive statement," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "I doubt that this hike, which was widely expected, will have any meaningful impact on the economy, but it will have a positive psychological effect on the market, because it is reassuring the world that the economy is doing better."
In a statement accompanying its action yesterday, the Fed said "output growth appears to have regained some traction, and labor market conditions have improved modestly."
The Commerce Department reported robust housing construction last month. The 2-million-unit pace of construction in August was the highest level of activity in five months.
Persistently high energy prices continue to weigh on investors' minds. Light sweet crude for October delivery settled up 75 cents at $47.10.
"The markets seem to be accepting prices over $40 a barrel; if they were to move back to $50 and higher we could see some setbacks, but oil prices at these higher levels have not had a major impact in pushing up inflation so far," said Lynn Reaser, senior market strategist at Banc of America Capital Management.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, on volume of 1.65 billion shares, compared with 1.5 billion on Monday.
The Fed's decision to raise short-term interest rates by another quarter-percentage point to 1.75 percent was viewed as a signal that the central bank sees continued improvements in the economic outlook and inflation.
