Ending at 11,045, a rise of 53 points.
NEW YORK (AP) — Investors gave stocks a rebound after reassuring
words from the Federal Reserve and another batch of upbeat earnings
The Dow Jones industrials rose 53 points Wednesday, making back a quarter of the 213 they lost the previous day.
Investors were able to shake off Standard & Poor’s downgrade of Spain’s debt, the third European country in two days to have its rating lowered. Instead, they focused on the domestic economy.
In an economic assessment statement that accompanied the Fed’s decision to keep interest rates stable, the central bank said the labor market is “beginning to improve” and it noted that housing starts have edged up. The statement, which came at the end of a two-day policymaking meeting, did say that employers are still reluctant to hire, but that came as no surprise to investors.
The Fed said it expects to keep rates low for an “extended period” to help strengthen the economy.
“The Fed essentially kicked the can down the road,” said Burt White, chief investment officer at LPL Financial in Boston. Eventually the Fed will have to raise rates, but that might not happen now until early in 2011, White said.
But the Fed’s view of the economy is actually more conservative than data suggests, White said. That’s because it is concerned about European debt problems, White added, noting that a slowdown in Europe’s economy could slow U.S. exports and affect the domestic recovery.
Earnings provided a boost to stocks throughout the day. Cable company Comcast Corp., defense contractor Northrop Grumman Corp. and Dow Chemical Co. were the latest companies to top earnings expectations.
Tim Courtney, chief investment officer at Burns Advisory Group in Oklahoma City, said that improving sales at companies like Dow Chemical prove the economy is healing.
“It indicates consumers may be getting back on their feet,” Courtney said.
The Dow rose 53.28, or 0.5 percent, to 11,045.27. The Standard & Poor’s 500 index rose 7.65, or 0.7 percent, to 1,191.36, while the Nasdaq composite index rose 0.26, or 0.01 percent, to 2,471.73.
Wednesday’s trading was far quieter than on Tuesday, when the market plunged on news that S&P slashed its credit ratings on Greece and Portugal. Greece’s debt was cut to junk status, deepening the country’s credit crisis.
“When you get some of these negative headlines, you will get a short-term negative pullback,” said Brett D’Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego.
European leaders calmed investors’ nerves early Wednesday. They said Greece would receive bailout money in time to cover $11.3 billion in debt payments due on May 19.
German leaders said their country’s portion of a nearly $60 billion bailout for Greece could be approved by the end of next week. Germany, the largest of the 16 countries that use the euro, has been demanding further spending cuts from Athens before it approves the bailout package.
Debt concerns across Europe have sent the euro sharply lower in the last few months. The euro traded in a narrow range against the dollar again on Wednesday, though it did touch its lowest level in a year earlier in the day.
Some analysts believe the debt problems could spread throughout the continent and hurt an economic recovery.
“Greece and Portugal will be Europe’s subprime problem,” said John Lekas, portfolio manager at Leader Capital in Portland, Ore.
After the close of trading, it was announced that Hewlett-Packard Co. was buying smart phone pioneer Palm Inc. for about $1 billion in cash. HP stock, which edged up 3 cents to $53.28 in regular trading, fell back to $52.93. Palm, which had closed down 2 cents at $4.63, shot up to $5.90, a 27 percent surge.
Dow Chemical rose $1.76, or 5.9 percent, to $31.83. Comcast rose 35 cents to $18.81, while Northrop Grumman rose $1.49, or 2.2 percent, to $68.67.
About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.44 billion shares.
Bond prices dipped after surging higher a day earlier. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.77 percent from 3.69 percent late Tuesday.
Gold and oil both rose.
The Russell 2000 index of smaller companies rose 1.12, or 0.2 percent, to 722.39.
Overseas, Britain’s FTSE 100 fell 0.3 percent, Germany’s DAX index dropped 1.2 percent, and France’s CAC-40 fell 1.1 percent. Japan’s Nikkei stock average tumbled 2.6 percent.