Interest rate policy jump-starts Wall Street

Wall Street had a bullish start to the new year today, with the Dow Jones industrials surging more than 129 points after the Federal Reserve signaled a willingness to stop its campaign of interest rate rises in the near future.

In minutes from the Fed’s December 13 meeting, policy makers disagreed on exactly when to stop the policy of raising rates in quarter-percentage-point increments, but the Open Market Committee members did agree that an end was coming soon.

The nation’s benchmark rate stands at 4.25%, the result of quarter percentage point hikes over the past 13 meetings dating back to June 2004.

Investors ended 2005 with the fear that the Fed would go too far in raising rates, choking off economic growth in its effort to stem inflation.

And that concern had kept stocks volatile for much of the year and stymied Wall Street’s typical year-end rally. But the news of a possible policy shift was greeted with enthusiastic buying today.

“Given the rise we saw, it shows you the importance of interest rates and what the Fed thinks,” said Jay Suskind, head trader at Ryan Beck & Co.

“This gives us hope that the Fed will be sensitive to the economy and we can get back to that nice ’Goldilocks’ economy where growth is just right.”

The Dow Jones industrial average rose 129.91, or 1.21%, to 10,847.41.

Broader stock indicators also advanced sharply. The Standard & Poor’s 500 index added 20.51, or 1.64%, to 1,268.80, and the Nasdaq composite index gained 38.42, or 1.74%, to 2,243.74.