Markets soar on Fed minutes
Wall Street shot higher Wednesday, sending the Standard & Poor’s 500 index to its first record close in more than seven years, as investors grew more confident the Federal Reserve might cut interest rates in the second half of 2007. The Dow Jones industrials also reached a new high close.
The S&P 500, considered by traders as the best barometer of U.S. stocks, surpassed the record of 1,527.46, set March 24, 2000, at the peak of the dot-com boom, closing at 1,530.23, up 12.12, or 0.80 percent.
The index of 500 of the nation’s biggest companies was powered by investors’ relief over the minutes from the Fed’s May 9 meeting of its Open Market Committee. The central bankers called inflation “uncomfortably high,” a stance that made it less likely that the Fed would act to cut interest rates.
However, analysts said central bankers indicated in the minutes that the economy will continue to accelerate — and that raised the possibility that the Fed hasn’t ruled out lowering rates. The Fed has left rates unchanged at 5.25 percent for seven straight meetings.
“Wall Street took the minutes to mean that later on this year there will be more of a chance for a rate cut, and people rallied on that,” said Ryan Larson, senior equity trader at Voyageur Asset Management. “It put a cut back on the table, and that’s what led to these record index closes.”
The S&P 500, which crossed its closing record on May 21 and then retreated, remains below its all-time trading high of 1,552.87, also reached in March 2000.
The Dow, the first of the major market indexes to recover from Wall Street’s prolonged slump in the early part of the decade, closed at 13,633.08, up 111.74, or 0.83 percent, and also reached a new trading high of 13,636.09.
The recovery of the S&P 500 comes as the index now has fewer technology stocks than in 2000. Financial services companies, which now make up the largest slice of the index, have helped drive the market’s run since the second half of last year.
By comparison, the Nasdaq isn’t expected to reach its closing high of 5,048.62, set March 24, 2000, anytime soon. The tech-dominated index — which closed up 20.53, or 0.80 percent, at 2,592.59 — was arguably overinflated by the rush to join the Internet boom.
The record close for the S&P and Dow came after the markets had opened sharply lower following a pullback in the often volatile Chinese stock markets. But, investors remained resilient and pushed stocks higher after determining China’s problems were likely contained and found little reason for pessimism from the Fed’s comments.
The S&P’s advance is of greater significance to many investors than the 47 record closes the Dow has achieved since the beginning of October. There are more investments, like mutual funds, that track the S&P 500; these funds are an integral part of many retirement plans.
The Russell 2000 index of smaller companies also closed at an all-time high, up 5.82, or 0.69 percent, to 843.35. The large-cap Russell 1000 and the broader Russell 3000 also hit record closes.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.56 billion shares.
Japan’s Nikkei stock average fell 0.48 percent; Britain’s FTSE 100 fell 0.41 percent; Germany’s DAX index dropped 0.61 percent, and France’s CAC-40 declined 0.52 percent.