NEW YORK — Wall Street advanced sharply Tuesday as investors interpreted minutes from the Federal Reserve's last meeting as indicating the central bank is ready to keep cutting interest rates to boost the economy. The Dow Jones industrial average and Standard & Poor's 500 index reached new record highs.
The minutes from the Federal Open Market Committee's Sept. 18 meeting, when Fed governors voted unanimously for a half-point cut, also showed that officials were concerned that the weakness in the dollar could lead to higher inflation. But the Fed _ signaling it is more willing to intervene _ also said the economic outlook was uncertain because of the summer's credit crisis, and that there were still risks to growth that justified lower rates.
The major indexes were little changed just before the minutes came out, then rose sharply. Investors were hoping that the Fed would lean toward future rate cuts; central bankers will meet again Oct. 30-31.
"This adds fuel to the fire that the Fed is going to try and reinvigorate the economy with further cuts, and that's what they are committed to," said Richard E. Cripps, chief market strategist for Stifel Nicolaus. "The likelihood of having a second cut either this month or at the December meeting seems greater than before the minutes."
Further, Federal Reserve Bank of St. Louis President William Poole said during a speech Tuesday he believes the financial markets are "still fragile" from weakening credit conditions, but that it appears to be stabilizing. San Francisco Federal Reserve Bank President Janet Yellen said in a speech the central bank must focus on "how financial market developments are likely to affect employment, output and inflation."
The Dow rose 120.80, or 0.86 percent, to 14,164.53, eclipsing the previous record close of 14,087.55 reached Oct. 1. The Dow had a new trading high as well, rising to 14,166.97.
The S&P 500 rose 12.57, or 0.81 percent, to a record close of 1,565.15. It surpassed the previous record close of 1,557.59, reached last Friday, and also hit a new trading high of 1,565.26.
The Nasdaq composite index rose 16.54, or 0.59 percent, to 2,803.91. This is the first time the technology-heavy index closed above 2,800 since January 2001. It is lagging the other big indexes because it was severely over-inflated by the dot-com boom, and it isn't expected to reach its record high close of 5,048.62 anytime soon.
Bonds slipped after the Fed minutes were released, with the 10-year Treasury note yield _ which moves inversely to its price _ rising to 4.65 percent from 4.62 percent before the minutes' release. The Treasury market was closed Monday for Columbus Day, and its yield was 4.64 percent on Friday.
While Wall Street was focused on a possible rate cut, bond investors believed the Fed's economic outlook is uncertain.
The dollar was generally lower against other major currencies, while gold prices rose. Light, sweet crude rose $1.24 to $80.26 on the New York Mercantile Exchange.
Investors have been waiting for any clue about the Fed's plans for the rest of the year, with most economists expecting a rate cut before the year is out. However, those hopes were somewhat dashed on Friday after the government reported better-than-expect employment numbers that eased fears the economy would slide into a recession.
Policymakers during the Sept. 18 meeting believed that "some further slowing of employment growth was likely." They also felt _ before seeing the jobs report _ that a further slowing in employment was likely this year.
"The Fed is in a pretty good situation right now," said Ed Peters, chief investment officer at PanAgora Asset Management. "They want a clear direction, they don't like when things are too much in the middle, and they are getting some pretty clear signs."
He said most analysts are now focused on the pace of third-quarter earnings, which unofficially started after the closing bell on Tuesday when Alcoa Inc. reported results. The aluminum producer said profit rose 3 percent, though sales fell from the year-ago period.
The results fell short of Wall Street expectations. Alcoa, which rose $1.42, or 3.7 percent, to $39.72 during the regular session, gave up 71 cents in after-hours trading.
Meanwhile, Yum Brands Inc. rose $1.82, or 5 percent, to $38.11 after the company on Monday reported stronger-than-epxected third-quarter profits. While revenue in the U.S. declined, strong international sales boosted results.
Molson Coors Co. shares rose $5.32, or 10.4 percent, to $56.15 after the brewer said it plans to combine its U.S. brewing operations with SABMiller PLC in an effort to compete better against industry leader Anheuser-Busch. The joint venture will be known as MillerCoors and will have responsibility for selling brands including Miller Lite, Miller Genuine Draft, Coors, Coors Light and Molson Canadian in the U.S.
SABMiller shares, which trade on the London Stock Exchange, rose 1.4 percent, to 1,487 pence.
NBC Universal said Tuesday it is buying cable television network Oxygen Media for approximately $925 million. General Electric Co., the parent of NBC, rose 49 cents to $42.02.
Google Inc. rose again Tuesday after closing above $600 for the first time Monday. The stock rose $5.57 to $615.18.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 2.80 billion shares, up from 2 billion shares on Monday.
The Russell 2000 index of smaller companies rose 5.58, or 0.66 percent, to 845.72.
Overseas, Japan's Nikkei stock average rose 0.56. Britain's FTSE 100 rose 1.14 percent, Germany's DAX index rose 0.08 percent, and France's CAC-40 advanced 0.56 percent.
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