Stocks rose Wednesday after the Fed said it expects the economy to grow as much as 3.3% this year.
Dow Picks Up 96, Nasdaq Gains 22
NEW YORK (AP) — Stocks rose to another high for the year Wednesday after Federal Reserve Chairman Ben Bernanke said central bank officials expect the economy to continue recovering as the jobs market strengthens. An index of small stocks hit a record.
The Fed said it expects the economy to grow as much as 3.3 percent this year. That’s below the Fed’s previous forecast in January, but the Fed also said it’s more optimistic about jobs. It now expects the unemployment rate to fall as low as 8.4 percent by the end of the year. The unemployment is currently at a two-year low of 8.8 percent.
Bernanke’s comments came during his first news conference. He was speaking after Fed officials held a two-day policy meeting. The Fed also announced that its $600 billion bond-buying program would end as scheduled in June. The Fed repeated its promise to keep interest rates low for “an extended period.”
The Dow Jones industrial average rose 95.59 points, or 0.8 percent, to close at 12,690.96. The Dow was already up before Bernanke’s appearance and rose another 50 points after the Fed chairman spoke. The last time the Dow was this high was in May 2008.
The Standard & Poor’s 500 rose 8.42, or 0.6 percent, to 1,355.66. That was its highest price since June 2008. The index is still 13 percent below the record high of 1,565 it reached in October 2007. The Nasdaq composite index rose 22.34, or 0.8 percent, to 2,869.88.
The Russell 2000 index, a benchmark for small stocks, surpassed its record high of 855.77 reached in July 2007. It closed up 5.27, or 0.6 percent, to 858.31. Small stocks have soared since the market’s rally began because they’re seen as having the best growth prospects as the economy recovers.
The economy’s rapid rebound from the recession has lifted smaller companies to record highs. Companies in the S&P 500 index have record amounts of cash on their balance sheets, leading to the widespread belief that smaller companies are natural targets for corporate acquisitions.
“The fact is that until we go into a sustained soft patch in the economy, the small (companies) are going to continue to outperform,” said Quincy Krosby, chief market strategist at Prudential Financial.
Gold prices rose after the Fed said it would keep interest rates near zero in order to stimulate the economy. That led traders to buy gold as a hedge against inflation and a weaker dollar, both of which can result from low interest rates. Gold for June delivery rose $13.60 to settle at $1,517.10 an ounce.
Bond prices were relatively unchanged after Bernanke’s press conference. The yield on the 10-year Treasury note rose to 3.35 percent from 3.32 percent late Tuesday.
Earnings results were mixed. Boeing Co. rose less than 1 percent after reporting earnings that beat analyst expectations. The airplane maker and defense contractor also said it still expects to deliver its long delayed 787 aircraft in the third quarter.
DeVry Inc. rose 7 percent. The for-profit education company reported that its earnings rose 18 percent as its revenue rose.
Broadcom Corp. fell 12 percent a day after the chip maker issued a second-quarter revenue outlook that was below analyst estimates.
Specialty glass maker Corning Inc. rose more than 2 percent after the company’s revenue surged on strong sales of glass for flat-screen televisions, computers and mobile devices.
Johnson & Johnson rose less than 1 percent after the health giant said it would buy medical device maker Synthes Inc. for $21.3 billion in one of the largest deals in the company’s history.
Investors were encouraged after the Commerce Department reported that businesses increased their orders for long-lasting manufactured goods by 2.5 percent in March, a bigger increase than economists had predicted.
“The manufacturing sector remains the real bright spot of the economy,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc.
Three stocks rose for every two that fell on the New York Stock Exchange. Volume was 4.2 billion shares.