Newspaper article THE JOURNAL RECORD

Stocks Rally on Rate Hikes

Newspaper article THE JOURNAL RECORD

Stocks Rally on Rate Hikes

Article excerpt

NEW YORK (AP) _ Stocks climbed Tuesday in a rally inspired by relief that the Federal Reserve finally raised interest rates as widely expected.

The financial markets had been bracing for the Federal Reserve to reveal its credit policy intentions and a midafternoon announcement by the central bank was greeted enthusiastically by stock and bond traders.

Blue chip stocks soared while a range of other issues posted solid gains in brisk trading following word that the Federal Reserve increased the discount rate for the first time in more than five years.

The Dow Jones industrial average, which was up about 12 points in mid-afternoon before the central bank disclosed its decision, surged 49.11 to close at 3,720.61.

Broad market indicators heavily weighted with New York Stock Exchange-listed issues also advanced strongly. The NYSE composite index added 2.35 to finish at 248.13 while Standard Poor's 500 stock index rose 4.88 to 449.37.

Gainers outpaced losers by about 8 to 5 on the NYSE and trading activity picked up on the Big Board's floor. Volume came to 311.16 million shares as of 4 p.m. on the NYSE, up from Monday's subdued level of 234.66 million shares.

Judging by the reaction of the financial markets, the rate hikes will help rather than hinder the economy and corporations, at least in the near future, said Hugh Johnson, market strategist at First Albany Corp.

"For the time being, the message of the stock and bond markets is that the Fed has hit the bull's eye," he said. "The Fed administered medicine strong enough to kill off worries about inflation but not harsh enough to hamper growth in the economy and corporate earnings."

But Johnson said in the longer run there's a strong chance that further rate increases will be needed to keep inflation at bay. "If we get them, the market will begin to worry about the economy and corporate profits."

The announcement from the central bank put to rest speculation about the scope of the Fed's long-anticipated move on rates. …

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