Investors Rally Behind the Fed, Sending Dow to a Triple-Digit Gain

Associated Press
Thursday, March 22, 2007

NEW YORK, March 21 -- Wall Street rallied sharply Wednesday after an economic assessment by the Federal Reserve ignited investors' hopes that the central bank might lower short-term interest rates.

The Dow Jones industrial average climbed 159.42, or 1.30 percent, to 12,447.52, after having been flat until the Fed announcement. The Standard & Poor's 500-stock index jumped 24.10, or 1.71 percent, to 1435.04, and the Nasdaq composite index advanced 47.71, or 1.98 percent, to 2455.92.

Thanks largely to Wednesday's triple-digit gains, the Dow has surged 337 points this week, its best three-day performance since November 2004.

Investors had nervously awaited the economic statement that accompanied the Fed's decision to leave short-term interest rates unchanged at 5.25 percent, and they were encouraged that the bank didn't refer to the possibility of "additional firming" of rates as it did in January. The market was also relieved that the Fed still expects the economy will "continue to expand at a moderate pace."

While a slowdown in the economy would likely quell the threat of inflation and perhaps open the way for a rate cut, it would also dent corporate profits.

Although removing the reference to "additional firming" seemed to suggest to some investors that the central bank has softened its stance toward raising rates, analysts pointed out the Fed still noted that "inflation risks remain," and that "recent readings on core inflation have been somewhat elevated."

While most of Wall Street's attention Wednesday was squarely on the Fed, a few key earnings reports drew interest. Morgan Stanley's first-quarter earnings and revenue were higher than Wall Street's estimates, and FedEx's third-quarter earnings came in stronger than expected.

Software companies showed gains. Oracle's third-quarter earnings and new software sales topped Wall Street's expectations, indicating that its expansion plans might be bearing fruit.

Movers

Morgan Stanley rose $4.66, to $80.77.

FedEx fell $1.30, to $110.99.

Oracle advanced 62 cents, to $18.17.

Adobe Systems gained $2.56, to $43.30, after reporting first-quarter results.


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