The Fed sees short-term inflation pressures but insists longer-term trends are stable. But silver and gold prices surge. Amazon.com shares soar.
The economy is still too weak to start raising interest rates from record-low levels, Federal Reserve Chairman Ben Bernanke said today. That was music to Wall Street's ears, and stocks and commodities moved up in late-afternoon trading.
Unemployment is too high and too many people are suffering ill effects for from being out of work for six months or more, Bernanke said. While the Fed agrees inflation is rising, longer-term trends are stable.
That's why the Fed hasn't pushed interest rates higher. If the trends worsen, however, the Bernanke said, he could see the Fed moving to quell the pressures. But he conceded, rising gas prices are "absolutely a lot of financial hardship for families."
The Dow Jones industrials ($INDU) closed up 96 points to 12,691. The Standard & Poor's 500 Index ($INX) was up 8 points to 1,356, and the Nasdaq Composite Index ($COMPX) had added 22 points to 2,870, powered in part by Amazon.com's (AMZN) record close of $196.63.
Bernanke's comments came at a first-ever news conference after the Fed said it would leave interest rates at record low levels for an extended period of time. And the central bank also agreed to continue its program of buying Treasury securities -- a program meant to boost the economy -- until its scheduled finish in June.
Most analysts read the Fed's insistence that longer-term inflation trends as stable as a signal the central bank sees little or no wage inflation on the horizon. Critics and traders, however, saw the Fed's position as allowing more attacks on the dollar, which moved to its lowest levels since the summer of 2008.
The Treasury purchasing program, known as Quantitative Easing 2, was started to help the economy rise up after the Great Recession.
The Fed left the target on its key federal funds rate at 0% to 0.25% and expects the target will remain at "exceptionally low levels" for an extended period. The Fed said it will complete its $600 billion program to buy in Treasury securities.
All members of the Federal Open Market Committee, the Fed's rate-making body, voted for the decision, including several members who have criticized QE2 in recent months.
Opponents of QE2, so-called because the Fed started another in 2009, have charged it has boosted prices for raw materials but has failed to boost employment substantially.
There was some concern that the central bank saw the economy "proceeding at a moderate place." After its March 15 meeting, the Fed said the economy was on "a firmer footing."
In a forecast released as Bernanke started to speak, the Fed cut its growth forecast for 2011 to 3.1% to 3.3%. In January, the Fed was projecting 3.4% to 3.9% growth.
The dollar was moved lower after the Fed decision, with the U.S. Dollar Index settling at 73.691, down 0.12 on the day and the lowest close since Aug. 4, 2008. The dollar index measures the dollar against a basket of currencies.
Commodity prices move higher
A lower dollar usually boosts prices for commodities priced in dollars -- like crude oil, gold, silver and copper. That happened today.
After the Fed announcement, gold moved higher and settled at a record $1,517.10 an ounce, up $13.60. Silver jumped 91 cents to $45.96 an ounce. It had hit as high as $46.22 an ounce. Copper was off 9.1 cents to $4.228 a pound.
Crude oil, meanwhile, was up 71 cents to $112.92 a barrel in electronic trading. The 10-year Treasury yield rose to $3.368% from 3.32% on Tuesday after an auction of 5-year notes were in line with estimates.
A bias to the upside for stocks
Twenty-three of the 30 Dow stocks were higher, led by General Electric (GE), up 3.3% to $20.76, and Verizon Communications (VZ), up 1.7% to $38.28.
Amazon.com was up was the top Nasdaq-100 ($NDX.X) performer and second among S&P 500 stocks. The company reported a 33% earnings decline in first-quarter profits but a 38% revenue increase. Seventy of the stocks in the index were higher.
Boeing (BA) shares were 0.8% higher at $76.12. The shares had been up as much as 2% after reporting earnings that beat Street estimates. But the stock price faded to as low as $75.05. One reason: Boeing's results were helped by a lower tax bill. Commercial plane revenue was flat.
Cisco Systems (CSCO) was the sold Dow loser on the day, down 1.9% to $17.19.
Most of the 30 raw-material producers in the S&P 500 retreated today, while 36 of 41 energy producers fell. Freeport-McMoRan Copper & Gold (FCX) lost 1.5% to $55.05 and ConocoPhillips (COP) slipped 2.6% to $79.11.
Exxon Mobil (XOM) reports results on Thursday, with Chevron (CVX) due on Friday. Both were lower today.
Savvis (SVVS) jumped 9.1% to $39.28 after CenturyLink (CTL) agreed to buy the company for $2.5 billion to add so-called cloud- computing services for business customers. CenturyLink was off 0.7% to $40.03.
Johnson & Johnson (JNJ) agreed to buy Synthes (SYST) for $21.3 billion, adding devices to treat bone fractures and trauma in the biggest purchase in the company’s 125-year history. J&J slipped 0.9 percent, while Synthes was little changed in Switzerland. Johnson & Johnson was down 1% to $64.33.
Orders for long-lasting goods rose in March for a third month, advancing 2.5%, the Commerce Department said. Economists had a predicted a 2.3% increase.
Comment:
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