Wall Street's Mood Improves on Fed, Interest Rates

Article excerpt

NEW YORK (AP) _ Stocks rallied for a second consecutive session on Monday, helped by optimism from last week's impressive rally and by a new government report showing more steady economic growth.

Stocks sensitive to economic cycles such as papers, airlines, chemicals and technology again helped lead the market higher.

The Dow Jones industrial average rose 17.80 points to 3,898.85, the index's highest close since March 18.

Advancing issues outnumbered declines by about 11 to 8 on the New York Stock Exchange.

Volume on the floor of the Big Board came to 266.27 million shares as of 4 p.m., down from 305.03 million in the previous session.

The Commerce Department said Americans' income rose 0.5 percent in July, largely meeting analyst's expectations.

The report, traders said, confirms the economy is growing at a moderate pace, with no surprises. Economists said the nature of the growth was ideal for stocks _ a boon to corporate earnings yet with little threat of inflation.

"It's clear we are not going to have an inflationary explosion," said James Melcher, president of Balestra Capital in New York.

Still, the stock market could have been knocked from its highs by a mixed finish in bond prices as Treasury investors worried about a move up in gold prices and some weakness in the dollar.

Stock investors are generally discouraged by higher interest rates because that increases the cost of money to companies and makes shares less attractive relative to interest-bearing investments.

But on Monday, investors chose to ignore the direction of rates, said Hugh Johnson, chief investment officer, First Albany Corp.

A strong earnings report from John Deere last week helped fuel the optimism, he said. …