Stocks End Up Sharply; Dow Up 145.32
Jun. 30, 1999
NEW YORK (AP) _ Stocks soared today after the Federal Reserve followed through on a long-expected plan to raise interest rates. Investors were heartened by a suggestion from the Fed that a single, modest rate increase might be enough to quell inflation.
At the close of trading on Wall Street, the Dow Jones industrial average was up 145.32 at 10,960.67. The index had fallen in the hours leading up to the Fed's announcement, dipping as much as 83.90 points below Tuesday's close.
Broader stock indicators also reversed course and ended the session with solid gains.
``The market got a major relief rally,'' said John Shaughnessy, chief investment strategist at Advest Inc.
Bond prices, battered for weeks by the threat of inflation and higher interest rates, also recovered, sending yields on the 30-year Treasury bond falling to 5.99 percent from 6.06 percent late Tuesday.
The Fed's Open Market Committee surprised few with the announcement of a quarter-percentage point increase in short-term interest rates. But the committee also returned to what's called a neutral bias on interest rates, which indicates Fed officials believe they may not need to follow up today's rate action with additional increases.
Bank and brokerage stocks shot higher as the Fed's future course appeared less punishing than previously feared. Shares of those companies are particularly vulnerable to higher interest rates, which cut into lending volume.
Traders welcomed the Fed's announcement, hoping for an end to the volatile price swings and sluggish trading that has characterized the market since mid-May, when the Fed first signaled its willingness to raise rates in an effort to hold inflation down.
As the second quarter and first half drew to a close today, some money managers shifted their portfolios up to the last minute, hoping to settle positions left in limbo while investors awaited the Fed's announcement.
David G. Sowerby, a vice president at Loomis, Sayles & Co., shrugged off the pressure of the Fed's decision, adding that despite the slump in major market indexes, a wide range of stocks in the Standard & Poor's 500 rose over the course of the second quarter.
``There was a broader, deeper leadership,'' he said. ``Many people will be pleasantly surprised when they look at their 401(k)s or mutual fund statements from this quarter.''
But while the overall market rallied, some stocks were left on the sidelines.
Shares of long-distance phone companies were mostly lower. MCI WorldCom faltered amid reports of a Justice Department antitrust investigation of its undersea cable business. Also, one Wall Street analyst predicted an industry price war as the companies struggle for competitive position.
Disney slipped after Merrill Lynch analyst Jessica Reif Cohen forecast lower earnings for fiscal years 1999 and 2000.