We might want to come back to this someday in the future, and see if this was the right thing to do....
KLP
go2net.com
Stocks, Bonds, Dollar Up Before Fed Meets
May 15 6:52pm ET
Reuters Television News
NEW YORK (Reuters) - U.S. stocks, bonds and the dollar rose on Monday as Wall Street bet the Federal Reserve will raise interest rates sharply on Tuesday to fight inflation, reducing the need for future increases.
But the gains came as both major U.S. stock exchanges logged one of their slowest days of the year. Investors avoided big commitments the day before the Fed is widely expected to increase borrowing costs by a half percentage point. In the commodities markets, oil prices ended near $30 a barrel in New York on indications of tight supplies in the third quarter.
``I think people are anticipating 50 basis points,'' said Arnie Owen, managing director of Roth Capital Partners in Newport Beach, Calif. ``I think that will take some of the uncertainty away and the market just can't deal with uncertainty. The expectation is that a big move would mean that we are either at the end or getting really close to the end of the increases.''
The Dow Jones industrial average (.DJI) rose 198.41 points, or 1.87 percent, to 10,807.78 on the strength of its financial and industrial components. News and speculation of mergers also lifted the 30-stock index higher.
Shares of Dow component International Paper (IP.N), a forest products company, gained 3-9/16 to 40-7/16 after the company succeeded in its bid to take over U.S. rival Champion International (CHA.N) for $7.3 billion in cash and stock. Champion was off 1 at 73-1/4.
Technology stocks swung into the positive in the last hour of trading, with the Nasdaq composite (.IXIC) ending up 78.59 points, or 2.23 percent, at 3,607.65.
The turnaround in Intel Corp.'s (INTC.O) was largely credited for helping pull the Nasdaq into plus territory late in the day. The world's largest maker of computer memory chips, which was up 3-1/8 to 118-1/8, had been battered last week after disclosing it could have to spend millions to replace defective memory chips.
Broader measures of the market all finished higher ahead of the much anticipated Fed meeting. The Standard & Poor's 500 index (.SPX) rose 31.40 points, or 2.21 percent, to 1,452.36. The small-cap Russell 2000 (.RUT) gained 6.87 points, or 1.40 percent, to 497.81 and the Wilshire 5000 (.TMW) shot up 286.53 points, or 2.18 percent, to 13,437.65.
Traders said the feather-light volume was characteristic of the turnover ahead of any key Federal Open Market Committee meeting. Tuesday will also mark the release of April's Consumer Price Index, which may be the last piece of key inflation data the central bank reviews before deciding whether to notch up interest rates.
The CPI, a gauge of inflation at the consumer level, is due for release Tuesday at 8:30 a.m. EDT (1230 GMT) with economists polled by Reuters expecting a 0.1 percent increase overall. The CPI is expected to show a rise of 0.2 percent when volatile food and energy prices are stripped out.
``I think that there are some investors who continue to see good values out there,'' said George Rodriguez, senior vice president at Guzman & Co. ``There's the thought that even if the Fed comes in with a half-percentage-point hike, the market is already trading with that built in.''
If the Fed opts for a half-point boost, as many on Wall Street expect, some market strategists believe stocks will rally on hopes that the hefty increase will signal the central bank's campaign of interest-rate increases is nearing an end.
Although recent economic reports have indicated that the recent Fed interest rate increases might be slowing down the economy, rising labor costs and record low U.S. unemployment continue to trouble the inflation-wary Fed.
A 50-basis-point move would represent a departure from the central bank's policy of raising interest rates only gradually to combat inflation with the past five increases since last June each ones of 25 basis points.
Bond prices ran up, reflecting growing confidence among investors that the Fed will be able to keep inflation under control. The 10-year U.S. Treasury note strengthened 16/32, pushing the yield down to 6.45 percent from Friday's close of 6.53 percent. The 30-year bond rose 22/32, or $6.875 on each $1,000 of face value. The yield, which moves in the opposite direction, fell to 6.16 percent from Friday's close of 6.21 percent.
In currency markets, the dollar rose to 91.12 cents per euro and 109.34 Japanese yen in late trading, from 91.97 cents per euro and 108.34 yen last Friday.
On the New York Mercantile Exchange, June crude oil settled at $29.92 a barrel, up 30 cents from Friday's close, and the highest since March 17. Prices rose Monday after the president of thee Organization of Petroleum Exporting Countries had said on Sunday he did not see an inclination among oil producers to increase supply.
Overseas, London's FTSE 100 index (.FTSE) fell 35.8 points or 0.57 percent to end at 6,247.7. In Tokyo, the Nikkei (.N225) slipped 44.17 points, or 0.25 percent, to close at 17,313.69.
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