NEW YORK (CNNfn) - U.S. stock prices rose sharply Tuesday for the second consecutive session, powered by gains in the technology sector, as investors expressed optimism that the Federal Reserve will not hike interest rates aggressively.|
The central bank's policy-making committee began its two-day meeting in Washington Tuesday, and is expected to announce its decision Wednesday afternoon. Most economists expect the Fed to boost short-term interest rates by a quarter point.
The Dow Jones industrial average rose 100.52 points to 11,041.05.
The Nasdaq composite index rallied 111.63 points, or 2.8 percent, to 4,051.98.
The S&P 500 index gained 14.82 points, or 1 percent, to 1,409.28.
On the New York Stock Exchange, gainers outnumbered losers 1,682 to 1,324, as trading volume reached 977 million shares. On the Nasdaq, advances led declines 2,320 to 1,831, on volume of 1.5 billion shares.
Treasury prices were higher, with the bellwether 30-year Treasury bond gaining 23/32 of a point in price, lowering its yield to 6.42 percent, its lowest yield of the year, from 6.48 percent late Monday. The dollar rose against the yen and was virtually flat against the euro.
As Wall Street regained momentum in afternoon trade from earlier sluggish activity, analysts said it is only natural to advance after the market's recent poor performance.
"The damage is already done," said Charles Payne, head analyst at Wall Street Strategies, referring to Friday's sharp sell-off. "Investors are willing to go in and buy on the weakness. There is enough conviction that 25 basis points (one-quarter percentage point) is already built in," he said.
"There's a lot of money to put to work. Buyers are just looking for an excuse to get involved," said Michael Lyons, senior trader at Morgan Stanley Dean Witter.
Nevertheless, market participants were still surprised with Wall Street's solid performance. "With the market's oversold condition, a small rally is expected. The extent has surprised everybody," said Ned Collins, head of trading at Daiwa Securities.
Wait and see on Fed decision
As the overall U.S. economy continues to strengthen, the central bank's first monetary policy meeting of the year takes place just as the nation marks the longest economic expansion in its history, 107 months, dating back to March 1991.
Analysts largely expect the Fed to increase short-term interest rates by a quarter point at the conclusion of its meeting Wednesday afternoon. Many analysts expect more aggressive action in upcoming months. The central bank meets again on March 21.
"A 25 basis-point (one-quarter percentage point) move is very likely and is the most likely outcome," said Jeff Palma, U.S. economist at Warburg Dillon Read.
Michael Holland, chairman of Holland & Co., stock market strategists, agreed. He told CNNfn it would be a mistake for the Fed to hike rates one-half a percentage point. (195K WAV) (195K AIFF)
The Fed increased short-term interest rates three times last year in an effort to slow the economy and pre-empt inflation. But the moves have had little effect. Analysts said economic news will be important in terms of how fast the Fed will increase rates over the balance of the year.
On the heels of last week's strong economic numbers on gross domestic product and employment cost index, the reports issued Tuesday reiterated the U.S. economy's rapid growth.
U.S. construction spending rose 2 percent in December, according to the U.S. Commerce Department. Meanwhile, National Association of Purchasing Management index of manufacturing activity fell to 56.3 in January from a revised 56.8 in December -- still an indication of manufacturing expansion. The closely watched "prices paid" component -- a measure of costs -- rose to 72.6, a five-year high, from a revised 68.3 in December.
Network Solutions surges
Investors eagerly bought technology shares, pushing the tech-heavy Nasdaq index to the 4,000 level once again. Among the composite index's top performers, Network Solutions, Inc. (NSOL: Research, Estimates) surged 32-7/16, or nearly 15 percent, to 249-5/16 after the Internet service company said the U.S. Justice Department formally ended its antitrust investigation on the company.
The Nasdaq also benefited from sharp gains to Qualcomm Inc. (QCOM: Research, Estimates) and Oracle Corp. (ORCL: Research, Estimates). Qualcomm jumped 9-1/16 to 136-1/16, extending Monday's strong performance, after the wireless technology company confirmed it signed an agreement with China United Telecommunications Corp., the No. 2 telecom in China. The deal paves the way for China to build a mobile phone network based on Qualcomm's wireless technology.
Oracle, a leading developer of database management software, advanced 4-1/16 to 54 after the company announced the availability of its dot.com Suite on the Linux operating system.
Among other companies in the news, Expedia Inc. (EXPE: Research, Estimates) soared 5-1/2, or more than 20 percent, to 32-3/4 after posting late Monday a smaller-than-expected loss of 16 cents a share for its fiscal second quarter.
The online travel service, which is majority-owned by Microsoft Corp. (MSFT: Research, Estimates), also announced plans to buy online travel companies VacationSpot.com and Travelscape.com for a total of about $177 million in stock. Microsoft added 5-1/16 to 102-15/16.
Companies involved in wireless technology were in the spotlight Tuesday. Sprint Corp. (FON: Research, Estimates) fell 1-1/4 to 63-3/8 after posting better-than-expected fourth-quarter earnings. Its wireless tracking stock, Sprint PCS Group (PCS: Research, Estimates), gained 1-3/4 to 111-13/16 after reporting a loss.
Elsewhere in the wireless arena, Bell Atlantic Corp. (BEL: Research, Estimates), GTE Corp. (GTE: Research, Estimates) and Alltel Corp. (AT: Research, Estimates) announced a swap of wireless properties in 13 states in order to win regulatory approval for Bell Atlantic's proposed venture with Vodafone AirTouch PLC. Alltel rose 4-1/4 to 71, but Bell Atlantic eased 2-3/8 to 59-9/16 and GTE slipped 3-1/8 to 70-1/8.
Nokia Corp. (NOK: Research, Estimates) Tuesday posted a 46 percent gain in fourth-quarter earnings, in line with expectations. Shares of the Finnish wireless equipment manufacturer, fell 1 to 184 in volatile trading.
GM lifts the Dow
Bolstering the blue-chip index was Dow component General Motors Corp. (GM: Research, Estimates), climbing 4-11/16 to 85-1/4 after the world's No. 1 automaker said it will restructure its stake in its non-automotive, communications division Hughes Electronics Corp. (GMH: Research, Estimates). Hughes Electronics gained 2 to 114-1/2.
Among other types of issues, shares of Alaska Air Group, Inc. (ALK: Research, Estimates) declined 1/8 to 31-3/4 after one of its MD-83 airliners crashed Monday in the Pacific Ocean northwest of Los Angeles with 88 passengers and crew aboard.
But, Amazon.com (AMZN: Research, Estimates) performed well, advancing 2-7/8 to 67-7/16 after the online retailer announced it will take an 18 percent stake in home products retailer living.com. An upgrade of Amazon's stock by Banc of America Securities to "buy" from "market perform" also contributed to gains.
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