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Stocks higher on news of fed rate hike Original Source Link: (May no longer be active)
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Stocks Higher on News of Fed Rate Hike
Jun 30, 3:11 PM (ET)
By MICHAEL J. MARTINEZ
NEW YORK (AP) - Stocks pushed back into positive territory in late trading Wednesday as the Federal Reserve announced a widely expected 0.25 percentage point increase in interest rates.
In late afternoon trading, the Dow Jones industrial average gained 26.69, or 0.3 percent, to 10,440.12.
Broader stock indicators were moderately higher. The Standard & Poor's 500 index was up 3.77, or 0.3 percent, at 1,139.97, and the Nasdaq composite index gained 9.20, or 0.4 percent, to 2,044.13.
The markets' reaction to the Fed's move - which raises the benchmark lending rate to 1.25 percent - was somewhat muted however, as the hike was widely expected. The increase, bringing rates off their 45-year low of 1 percent, was the first in four years.
There was little unexpected in the Fed's accompanying policy statement as well, which promised to continue a "measured pace" of rate increases to combat inflation. While the Fed admitted that there is a somewhat higher risk of inflation, the statement added that some of the inflation factors were transitory and that the risks were balanced.
"This has certainly been a very well telegraphed change in direction," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "It was an expected increase and a very balanced statement, both designed to keep the market confident in the Fed's ability to manage the economy."
Prior to the announcement, stocks were sluggish as investors hedged their bets against a Fed surprise that never materialized. Investors are now looking ahead to a key jobs report on Friday, as well as July's second quarter earnings reports.
"The anticipation of this rate hike has been far worse than the reality of it," said Brian Bush, director of equity research at Stephens Inc. "I think it's going to be a positive for the market to get past today's announcement so we can start looking at earnings pre-announcements and the underlying economic data."
In a preview of what the second-quarter results might look like, a number of companies reported better-than-expected earnings late Tuesday and Wednesday before the session. Cereal and packaged foods producer General Mills Inc. gained $1.27 to $47.39 after posting earnings that beat Wall Street expectations by 2 cents per share.
Agriculture and biotech firm Monsanto Co. (MON) posted a 45 percent gain in quarterly earnings, which were 3 cents over analysts' estimates. Monsanto rose $1.08 to $38.28.
Research In Motion Ltd., makers of the popular Blackberry e-mail pager, surged $9.54, or 16 percent, to $68.92 after it beat estimates by 4 cents per share due to better-than-expected gross margins.
Mortgage giant Freddie Mac (FRE) saw its quarterly earnings fall 52 percent from a year ago due to interest rate volatility, but analysts were cheered by the company's ability to manage risk. Freddie Mac gained 4 cents to $63.23.
Advancing issues outnumbered decliners by nearly 2 to 1 on the New York Stock Exchange, where volume came to 966.41 million shares, compared with 1.03 billion at the same point Tuesday
The Russell 2000 index of smaller companies was up 2.75, or 0.5 percent, at 590.58.
Overseas, Japan's Nikkei stock average ended the session flat. In Europe, Britain's FTSE 100 closed down 1.1 percent, France's CAC-40 fell 0.6 percent for the session and Germany's DAX index dropped 0.4 percent in late trading.
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