Stocks finished broadly higher Wednesday, helped by solid earnings reports and sinking oil futures. The Federal Reserve kept interest rates unchanged, as expected, but did not close the door on further rate hikes.
The Dow Jones industrial average rose 72.28 points, or 0.63%, to 11,613.19, within 110 points of the benchmark's all-time high. The broader Standard & Poor's 500 index added 6.86 points, or 0.52%, to 1,325.17. The tech-heavy Nasdaq composite climbed 30.52 points, or 1.37%, to 2,252.89, despite a slide by Google (GOOG) on a reported decline in banner advertising.
NYSE breadth was decidedly positive, with 22 issues advancing for every 11 declining. Nasdaq breadth 19-11 positive.
The Fed's decision to hold interest rates steady was in focus Wednesday. In its accompanying statement, the Fed said some inflation risks remain as the economy continues to slow, reiterating that future rate hikes will be data-dependent. Richmond Federal Reserve Bank President Jeffrey Lacker was again the lone dissenter, preferring a 25 basis-point increase in interest rates.
The Fed's policy statement largely reiterated the central bank's comments following its previous meeting. "They're just reaffirming the statmeent they made on Aug. 8, and reaffirming their position that a halt right now in rate hikes is a good policy," says Lincoln Anderson, chief investment officer and chief economist at LPL Financial Services.
Recent events could mean the Fed is done raising rates for the year, some analysts say. "Our economics team has scaled back their forecast of the ultimate peak in the fed funds rate for this cycle to the current level of 5.25%," says Thomas McManus, chief investment strategist at Banc of America Securities. "Falling energy prices, further weakening of the housing sector and a few tame inflation reports have put a lid on inflationary expectations for the time being."
Thursday's economic calendar holds leading indicators, the Philadelphia Fed index, and weekly jobless claims.
Oil prices extended their recent slump to their lowest levels since March. In the energy markets, October West Texas Intermediate crude oil futures fell $1.20 to $60.46 a barrel after inventory data came in mixed and President George W. Bush expressed support for negotiations with Iran.
In earnings news, Oracle (ORCL) was sharply higher as Citigroup raised its rating on the tech bellwether's stock from hold to buy after the software maker reported a 29% jump in fiscal first-quarter profit.
Investment bank Morgan Stanley (MS) was modestly higher after posting third-quarter net income of $1.85 billion, up from $144 million a year earlier and ahead of analysts' expectations.
Shares of Circuit City (CC) gained after the electronics retailer posted a sharp rise in second-quarter earnings and raised its outlook for fiscal 2007 sales growth.
Among other stocks to watch, Toyota Motor (TM) set a 2008 sales target of 9.8 million vehicles, challenging sales leader General Motors (GM) as the U.S. automaker focuses on restructuring.
Meanwhile, Broadcom (BRCM) was slightly lower as its chief financial officer retired. The semiconductor company is restating results to reflect $1.5 billion in costs related to options irregularities.
Insurer Marsh McLennan (MMC) was lower amid reports the company may sell Putnam Investments.
European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 34.4 points, or 0.59%, to 5,866.2. Germany's DAX index climbed 80.92 points, or 1.38%, to 5,954.38. In Paris, the CAC 40 index added 76.75 points, or 1.5%, to 5,192.74.
Asian markets ended mixed. Japan's markets Nikkei 225 index slid 155.61 points, or 0.98%, to 15,718.67. In Hong Kong, the Hang Seng index advanced 166.26 points, or 0.96%, to 17,512.96. Korea's Kospi index declined 7.51 points, or 0.55%, to 1,366.44.
Treasury yields erased early losses after the Fed statement remained largely unchanged from the previous meeting. The 10-year note was little changed at 101-04/32 for a yield of 4.73%, while the 30-year bond rose modestly in price to 94-17/32 for a yield of 4.85%.