Stocks move higher in New York

Stocks moved higher on Wall Street today as the Federal Reserve issued a widely expected interest rate rise and investors welcomed the prospect of a merger in the software industry.

Using language nearly identical to the statement it issued on November 10, the Fed’s Open Market Committee raised the nation’s benchmark interest rate by a quarter percentage point to 2.25 %.

Stocks moved solidly into positive territory on the news, as buyers who had stuck to the sidelines ahead of the announcement returned to the market

Wall Street had been disappointed earlier in the day by the latest reading of the nation’s trade deficit, which surged to a record 55.5 billion dollars in October.

Continued demand for Chinese imports and the high cost of oil contributed to the growing deficit, which was much larger than the 52.4 billion dollars Wall Street had expected. While the numbers looked bad from a monetary perspective, they showed continued consumer spending, which some took as a bullish sign.

The Fed’s latest move suggests there is “a green light for further rate increases,” said Hans F Olsen, chief investment officer at Bingham Legg Advisers, who thinks the markets are already anticipating a series of gradual hikes to at least 3% next year. In the near-term, getting 2004’s final rate hike out of the way helped investors focus on the day’s other news.

“There seems to be a reawakening of merger and acquisition activity, and signs are there that people are continuing to spend at a healthy clip,” Olsen said. “Put those two things together, and this rate increase, which was widely expected, and whatever surprises the market has seen have been pleasant surprises.”

According to preliminary results, the Dow Jones industrial average closed up 38.13, or 0.36%, at 10,676.45, extending Monday’s 95-point gain.

Broader stock indicators were also higher. The Standard & Poor’s 500 index gained 4.70, or 0.39%, to 1,203.38, rising to a level where it hasn’t traded since August of 2001. The Nasdaq composite index rose 11.34, or 0.53%, to 2,159.84.

Adding to the market’s upbeat mood, oil prices appeared to be holding steady in the 41 dollars range. Light, sweet crude for January delivery settled up 81 cents, or 2%, at 41.82 dollars per barrel on the New York Mercantile Exchange, nearly 14 dollars cheaper than the record settlement price of 55.17 dollats set in October.

Buoying tech stocks, The New York Times reported that Symantec Corp was in talks to acquire Veritas Software Corp for 13 billion dollars. A deal could be announced later this week, the newspaper said. Symantec tumbled 5.41 dollars, or 16%, to 27.45 dollars; Veritas surged 2.19 dollars, or 8.7 %, to 27.38 dollars.

Verizon Communications Inc shed 24 cents to 41.04dollars on reports that the company’s wireless arm would offer 36 billion dollars for Nextel Communications Inc, topping Sprint Corp’s 35 billion dollart offer. Nextel was unchanged at 29.99dollars, while Sprint climbed 66 cents to 25.10 dollars.

American Express Co gained 91 cents to 55.95 dollars after landing a major credit card distribution pact with Citigroup, part of the company’s effort to co-market its cards with a variety of financial institutions. Citigroup was up 10 cents at 46.87 dollars on the news.

Merck & Co. added 57 cents to 29.62 dollars after filing a statement with regulators that outlined plans to cut an additional 700 jobs before the end of the year, adding to the 4,400 job cuts already planned.

General Electric Co declined 10 cents to 37.38dollars after reiterating its expectations for double-digit earnings growth in both the current quarter and the 2005 fiscal year, in line with Wall Street expectations.

Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange.

The Russell 2000 index of smaller companies was up 5.51, or 0.86 %, at 643.54.