Posted on: Thursday, June 2, 2005
Interest-rate hopes and EU turmoil boost stocks
By Meg Richards
Associated Press
NEW YORK — Stocks strode higher yesterday as investors grew hopeful that the interest rate tightening cycle might soon draw to a close, but a late-session rise in oil prices limited Wall Street's gains. Bonds rallied, sending the yield on the 10-year Treasury note below 4 percent.
"The Fed has told us they will continue to raise rates at a measured pace, but each decision will be made on the basis of existing or current conditions. And current conditions tell me that it's not a sure bet the Fed will raise rates at their June 30 meeting," Johnson said. "It's good news. But look: Whenever there's a lot of money chasing securities, prices are going to go up, and right now you have a lot of capital flowing in from Europe."
Bonds continued to build on Tuesday's rally; the yield on the 10-year Treasury note dropped to 3.88 percent, from 3.98 percent Tuesday. The euro slid as Netherlands voters joined France in rejecting the EU constitution, putting any economic reforms it might bring on hold.
Oil futures climbed $2.63 to $54.60 per barrel on the New York Mercantile Exchange on concerns that strong demand will mean short supply later this year.
Advancing issues outnumbered decliners about 3 to 1 on the NYSE, on volume of 1.83 billion shares traded, compared with 1.92 billion Tuesday.
Communications problems halted trading several minutes before the market closed.
Data from the Institute for Supply Management indicated the manufacturing sector is continuing to expand, albeit at a slower pace, and an index component that measures prices paid by purchasing managers suggested that inflation remains in check. That, combined with an influx of capital amid questions about whether a European Union constitution will be approved, added up to good news for U.S. markets, said Hugh Johnson, chairman of Johnson Illington Advisors.
