US stocks higher as rates unmoved

Wall Street shot higher today after the Federal Reserve’s decision to leave rates unchanged bolstered investor confidence that the US economy will rebound strongly. The Dow Jones industrials climbed 140 points, its best advance in a month.

The Nasdaq composite notched its best gain in nearly four months, while the Standard & Poor’s 500 had its strongest advance in a month.

The Fed’s inaction was expected but investors were pleased that policymakers indicated rates would probably remain at current low levels for some time. The news was particularly welcome after a strong consumer confidence report earlier in the day.

“The Fed statement appeased pretty much everyone,” said Keith Keenan, vice-president of institutional trading at Wall Street Access, a New York-based brokerage firm. “They hit all the right notes.”

“Equity investors wanted them to keep rates low for the foreseeable future. … And they appeased bond investors by saying inflation was not anywhere in sight,” he said.

The Dow closed up 140.15, or 1.5%, at 9,748.31, having gained 25.70 in the previous session. It was the best one-day point gain since October 1, when the blue-chip average rose 194.14 points.

The broader market also moved sharply higher. The Nasdaq composite index gained 49.35, or 2.6%, to close at 1,932.26. It was the biggest gain since July 7, when the tech-focused index rose 57.25.

The Standard & Poor’s 500 index rose 15.66, or 1.5%, to 1,046.79. It was the best advance since October 1, when the index gained 22.25.

Stocks were already trading higher before the Fed decision following an upbeat economic report. The Conference Board said its consumer confidence index rose to 81.1 this month from 77 in September. The business research group said consumers were encouraged by signs of a stronger job market.

Meanwhile, the Commerce Department said new orders for big-ticket goods rose by 0.8% in September after a 0.1% decline in the previous month. September’s reading was slightly lower than forecasts, however, the August number was revised upward today from the 1.1% drop initially reported.

Analysts cautioned, though, that the market’s advance would likely be limited in the weeks ahead.

With the earnings season drawing to an end, Wall Street will need another catalyst to inspire more strong buying.

Stocks have mostly gained since mid-March but investors have become more hesitant in recent weeks, looking for more definitive signs of an economic recovery. Analysts say investors are looking for reasons to buy. On Monday, for example, a string of merger announcements pushed the market higher. But there are still some concerns that company earnings did not justify higher stock prices.

Also, some stocks had moved higher in anticipation of positive earnings news from companies, meaning there was little bump-up when the results were actually announced.

Twenty-nine of the 30 stocks comprising the Dow Jones industrial average finished higher, led by The Home Depot, which climbed 1.50 to 37.50. Boeing Co finished unchanged.

RJ Reynolds Tobacco Co. jumped 5.72 to 48.97 after the tobacco company said it would merge with rival Brown & Williamson Tobacco Corp in a 2.6 billion deal.

Lockheed Martin Corp. fell 78 cents to 45.51 after the defence contractor reported a drop in third-quarter profit that nevertheless came in higher than Wall Street’s expectations.

Advancing issues were ahead of decliners 2 to 1 on the New York Stock Exchange. Volume was heavy.

The Russell 2000 index, a barometer of smaller company stocks, rose 10.50, or 2%, to 525.85.