Stocks moved higher today, carrying the Dow Jones industrial average to a new closing high, as investors grew more confident that the latest interest-rate increase will enable the economy to grow without runaway inflation.
The Dow rose 42.74 points to close at 11,326.04, topping its previous record close of 11,299.76, set Monday.
Broader indicators also closed higher. The Standard & Poor's 500-stock index rose 18.29, to 1381.79, and the Nasdaq composite index rose 53.23, to 2805.60. The Nasdaq, which lists many of the nation's leading technology companies, notched its fourth straight increase and is edging back toward its July 16 record close of 2864.48.
Bond prices, which rose after the Federal Reserve's decision to raise interest rates, propelled stocks higher today. The price of the Treasury's benchmark 30-year bond rose $11.56 per $1,000 invested, pushing the yield down to 5.85 percent--its lowest level in almost three months--from 5.93 percent late Tuesday.
As the market fretted in the weeks leading up to the Fed's Tuesday meeting, bond yields soared as high as 6.24 percent, a level not seen since October 1997. That drew investors away from stocks as they sought more lucrative, guaranteed returns from bonds.
But Tuesday's quarter-point rate increase--and the Fed's suggestion that inflation may be successfully contained in the coming months--sent investors back to stocks.
Technology stocks rose most sharply as investors made bets that those companies will continue to grow in a stable interest-rate climate. Microsoft extended a string of recent gains, climbing 3 1/8, to 95-5/16. Amazon.com advanced 12-13/16, to 132 7/8, and America Online rose 4 1/2, to 103 1/4.
Bank stocks, which should benefit from good news on interest rates, dropped after Chicago-based Bank One warned that 1999 profits will fall well short of Wall Street's expectations, largely because of slower growth in its credit-card business. Its stock plunged 12 5/8, to 43, dragging other financial-services stocks with it. Chase Manhattan fell 1-1/16, to 85 1/2.
But a wide range of Dow components gained ground. AT&T rose 2 5/8, to 49 1/4; General Electric rose 2-11/16, to 119-5/16; and Johnson & Johnson gained 2-9/16, to 105 3/4.