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Optimism For Rate Cut Helps Push Stocks Up

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The Associated Press

Published: September 7, 2007

NEW YORK - Wall Street shook off early uncertainty to close moderately higher Thursday as a series of mixed economic reports managed to make investors more optimistic about the chances for an interest rate cut.

The market was uneasy after the Mortgage Bankers Association said homeowners beginning the foreclosure process in the second quarter reached a record 0.65 percent. But investors gleaned some reason for optimism from comments from Dallas Federal Reserve President Richard Fisher, who said inflationary pressures are 'increasingly well behaved,' and that the central bank is 'listening carefully' to business conditions. St. Louis Fed President William Poole made similar comments Thursday.

'They didn't explicitly say they were going to cut rates, but some of the talk from the day gave reason to believe they may be leaning that way,' said Todd Salamone, director of trading at Schaeffer's Investment Research. 'The market is driven by words from the Fed that reinforce the idea they'll step up if necessary, and it is also very much data driven.'

Dows Wobbles Up

The Dow Jones industrial average rose 57.88, or 0.44 percent, to 13,363.35, after earlier wobbling in and out of positive territory.

Broader stock indicators also lifted. The Standard & Poor's 500 index rose 6.26, or 0.43 percent, to 1,478.55, and the Nasdaq composite index rose 8.37, or 0.32 percent, to 2,614.32.

Bonds fell as stocks recovered ground. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose to 4.51 percent from 4.47 percent late Wednesday. The dollar was lower against most other major currencies, while gold prices jumped.

The credit markets, whose problems caused the volatility on Wall Street during the past month, remain tight. The New York Fed, which carries out the central bank's market operation, injected a total of $31.25 billion through three repurchase agreements Thursday - the largest it has injected in weeks - to help keep the markets liquid.

The Fed also reported that about 3 percent of asset-backed commercial paper, a type of bond companies sell for quick cash, was unable to be rolled over in the week ended Wednesday.

Further, Wall Street doesn't want to see signs of accelerating inflation - such as surging crude oil prices, which briefly spiked above $77 a barrel on supply worries after the U.S. embassy in Nigeria said American and other Western interests in the country are at risk of a terrorist attack and after news that Syrian armed forces had opened fire on Israeli fighters. Inflationary risks have kept the Fed from lowering interest rates in recent months.

A barrel of light, sweet crude rose 57 cents to $76.30 on the New York Mercantile Exchange.

News Called Benign

John O'Donoghue, co-head of equities at Cowen & Co., said most of Thursday's news was fairly benign. He explained that most people were waiting to see the jobs report today, which could provide the markets a better idea about what the Fed's next move will be.

Meanwhile, the Institute for Supply Management's reading on the nonmanufacturing sector showed that activity expanded in August at the same rate as in July.

Not only were investors worried about the rising foreclosure rate, but late Wednesday, mortgage lender Countrywide Financial said it will cut an additional 900 jobs nationwide after eliminating about 500 positions last month. The nation's largest mortgage lender by volume employs about 60,000 people.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to about 2.74 billion shares, down from 2.93 billion on Wednesday.

The Russell 2000 index of smaller companies fell 0.35, or 0.04 percent, to 792.92.

Overseas, Japan's Nikkei stock average rose 0.61 percent. Britain's FTSE 100 rose 0.68 percent, Germany's DAX index rose 0.44 percent, and France's CAC-40 advanced 0.45 percent.

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