Stocks rise ahead of Fed
Major gauges gain as investors eye strong earnings, upbeat confidence report; two-day Federal Reserve policy meeting is under way; oil prices jump.
NEW YORK (CNNMoney.com) -- Stocks rose Tuesday, as investors welcomed an upbeat read on consumer confidence and some strong earnings, but gains were limited amid soaring oil prices and the ongoing Federal Reserve policy meeting.
The Dow Jones Industrial average (up 28.68 to 12,519.46, Charts) added around 0.3 percent, according to early tallies, while the broader S&P 500 (up 7.75 to 1,428.37, Charts) index gained nearly 0.6 percent. The tech-heavy Nasdaq composite (up 7.07 to 2,448.16, Charts) added 0.3 percent.
Stocks rose in the morning after an upbeat January consumer confidence report. But the advance weakened in the afternoon in response to a more than five percent rise in oil prices and jitters about the Fed.
Treasury prices rose, lowering the corresponding yields and the dollar was a bit lower versus other major currencies.
Oil and gold prices rallied.
Here's a look at what was moving near the close.
Meeting Tuesday and Wednesday, policymakers were widely expected to hold a key short-term interest rate steady at 5.25 percent, just like they have for the last four meetings.
As always, investors will be attuned to what the bankers have to say in the accompanying statement about the economy and the future direction of interest rates.
Stocks rallied last fall partly on bets that the Federal Reserve would start cutting rates as soon as the first quarter of this year. But such bets have disappeared in response to recent reports that have suggested a stronger finish to the fourth quarter and start to the first than had been expected, Layman said.
As a result, investors have been coming to terms with the likelihood that the Federal Reserve may not cut interest rates any time soon and that has explained in part why the markets haven't done much in January.
However, market participants have not absorbed the possibility of a rate hike this year, and that's where there may be some vulnerability for stocks, said Jeff Layman, director of investment services at BKD Wealth Advisors.
"The risk tomorrow is if the language in the statement indicates that they are still in tightening mode," Layman added.
The central bank is scheduled to announce its decision on interest rates and release its statement at around 2:15 p.m. ET Wednesday.
Ahead of the Fed, reports are expected Wednesday morning on gross domestic product growth in the fourth quarter, manufacturing in the Midwest and national construction spending.
The Conference Board released its January reading on consumer confidence Tuesday morning, kicking off a big week for economic news.
The confidence index rose to 110.3 in January from an upwardly revised 110 in December. Economists surveyed by Briefing.com expected a reading of 110.
The report showed consumers most comfortable with the present situation, rather than the future, reflecting the strong jobs growth and lower oil and gas prices that have been seen recently, Layman said.
Investors were also focused on earnings, with three Dow components reporting results Tuesday morning.
3M (down $4.03 to $74.93, Charts) posted a weaker-than-expected fourth-quarter profit and cautioned about the slowdown in the global economy, sending shares sharply lower. 3M is often seen as a representative of the broader economy because of the breadth of its product line, which ranges from Scotch tape to Thinsulate insulation.
Procter & Gamble (down $0.26 to $64.62, Charts) reported higher quarterly sales and earnings that topped estimates, thanks to strong sales of its consumer products. The company also boosted its 2007 profit outlook. Yet, investors took a 'sell the news' approach and sent P&G shares lower.
Nearly one-fourth of the S&P 500 reports results this week. Currently, earnings are on track to have risen about 10.5 percent from the same quarter a year earlier, according to Thomson Financial. That's a blended figure, combining reported and expected results.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by over two to one on volume of 1.25 billion shares. On the Nasdaq, advancers beat decliners three to two on volume of 1.51 billion shares.
U.S. light crude oil for March delivery added $2.96 to $56.97 a barrel on the New York Mercantile Exchange.
Treasury prices rose, lowering the yield on the benchmark 10-year note to 4.88 percent from 4.89 percent late Monday. Treasury prices and yields move in opposite directions.
In currency trading, the dollar was slightly lower versus the yen and euro.
COMEX gold rose $1.10 to settle at $650.20 an ounce.