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Wall St extends rise, Traders not see change in Fed policy
NEW YORK: US stocks advanced for a second straight day on Tuesday as investors bet the Federal Reserve would temper statements which were interpreted to mean a sooner-than-expected winding down of stimulus efforts.
By: Market prophecy financial adviser
Strong market breadth showed an increased appetite for equities, but trading volume was light, a sign that many market participants were taking a wait-and-see attitude.
The Fed's two-day policy meeting started Tuesday, and traders are trying to guess its timeline for scaling back purchases of $85 billion per month of bonds. The policy, known as quantitative easing, has helped fuel stocks' rally, taking major indexes to record levels. The S&P is about 1 per cent away from its all-time closing high.
The Fed has said its goal is to target its benchmark interest rate near zero to lower the unemployment rate to 6.5 per cent as long as inflation stays below 2.5 per cent.
A policy statement from the central bank will be released Wednesday, and investors expect the current level of purchases will be maintained despite strong recent data pointing to improvements in the economy. Fed Chairman Ben Bernanke recently said the program would be wound down when the economy is strong enough, causing a surge of volatility in financial markets.
"Stocks are higher as investors adjust to the fact that not only will the Fed not announce tapering tomorrow, but that the economy is quite capable of growing without it," said David Kelly, the chief global strategist for JPMorgan Funds in New York, which has about $400 billion in assets under management.
"There are reasons to be cautious and uncertain, but the market is still cheap and should continue to expand for a long time," he said, adding that he was overweight on cyclical groups, whose fortunes are especially tied to the pace of growth.
The Dow Jones industrial average was up 138.38 points, or 0.91 per cent, at 15,318.23. The Standard & Poor's 500 Index was up 12.76 points, or 0.78 per cent, at 1,651.80. The Nasdaq Composite Index was up 30.05 points, or 0.87 per cent, at 3,482.18.
General Electric gained 2.4 per cent to $24.33 and was one of the most actively traded stock on the New York Stock Exchange. Natural sources company Cliffs Natural Resources jumped 5 per cent to $18.59 as one of the biggest gainers on the S&P. Micron Tech climbed 3.9 per cent to $13.75, helping to boost the Nasdaq.
Boeing launched a larger version of its flagship Dreamliner aircraft at the Paris Airshow on Tuesday, sharpening the battle with rival Airbus in the market for fuel-efficient, long-distance jets. Boeing shares rose 1 per cent to $104.08, its highest since October 2007