Newspaper article St Louis Post-Dispatch (MO)

Stocks Rise as Bonds Rally, Dropping Rates

Newspaper article St Louis Post-Dispatch (MO)

Stocks Rise as Bonds Rally, Dropping Rates

Article excerpt

U.S. stocks recouped some of Monday's losses on Tuesday as the government bond market rallied for the first time in seven sessions and Britain lowered a key interest rate.

Low rates prompt people to move money out of fixed-rate investments and into the stock market in hopes of finding higher returns. They also speed the economic recovery. The rate cut in Britain was perceived as good for the United States because Britain is an important export market for U.S. companies, traders said.

The Bank of England cut the base lending rate, the equivalent to the U.S. discount rate, to 5.5 percent from 6 percent, the lowest since June 1972. The U.S. discount rate now stands at 3 percent.

"The stock market was due for a rally, and the bond market was the catalyst," said Barry Berman, head trader at Robert W. Baird.

AMR Corp., parent of American Airlines, sank 3 1/2 to 65 1/8. Analysts Thomas Longman of Bear, Stearns & Co. and Candace Browning of Merrill Lynch & Co. cut their ratings of the stock. …

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