NEW YORK (AP) - Wall Street advanced sharply Wednesday after minutes from the Federal Reserve's last meeting -- revealing no surprises -- showed that central bankers remain concerned about inflation levels.
Investors apparently saw little new in the minutes from the central bank's May 9 meeting, during which the Fed's Open Market Committee called inflation 'uncomfortably high.' That stance made it less likely that the Fed would act to cut interest rates, but Wall Street appeared to be coping well with that reality.
Policy makers again reiterated their believe the U.S. economy will begin to pick up, but didn't directly address the possibility of lowering rates, according to the minutes. Inflationary pressures, along with a sluggish housing market, might imply the Fed still sees little reason for a cut this year.
'Nothing popped out that was unexpected. It's much too early for them to declare victory on inflation,' said Ethan Harris, Lehman Brothers chief U.S. economist, referring to the Fed.
'The Fed is not about to deliver that rate cut that the stock market would love to see. That's a little disappointing to the market, but I think they're getting used to the idea that there is going to be no Christmas present this summer.'
All three major stock indexes at first vacillated as traders analyzed the minutes, then turned higher.
The Dow Jones industrial average, little changed before the minutes were released, was up 70.70, or 0.52 percent, at 13,592.04, in late afternoon trading.
Broader stock indicators also gained. The Standard & Poor's 500 index rose 8.53 or 0.56 percent, to 1,526.64, and the Nasdaq composite index rose 11.19, or 0.44 percent, to 2,583.25.
Bonds edged up, with the yield on the benchmark 10-year Treasury note falling to 4.87 percent from 4.88 percent late Tuesday. Fixed-income investors had previously driven down bond yields in anticipation the Fed could signal a rate cut could happen sometime this year.
The Fed kept interest rates unchanged at 5.25 percent at that meeting for a seventh straight time, and had made minimal changes to its accompanying economic statement. The few changes made in the statement signaled that policy makers have become slightly more upbeat about U.S. economic prospects.
Stocks spent most of the morning session in negative territory after a plunge in China's markets stunted U.S. investors. But, Wall Street's rebound showed investor confidence, according to analysts.
'The market really showed its resilience in coming back from the China drop, and didn't get taken this time around,' said Ryan Larson, senior equity trader at Voyageur Asset Management. 'I think you'll see the market continue to trade sideways until we get some underlying data.'
When Beijing tripled a tax on stock trading to cool the country's market boom, the main Shanghai Composite Index dropped 6.5 percent and the Shenzhen Composite Index for China's smaller second market slid 7.2 percent.
Japan's Nikkei stock average fell 0.48 percent; Britain's FTSE 100 fell 0.41 percent; Germany's DAX index dropped 0.61 percent, and France's CAC-40 declined 0.52 percent.
Investors have been jittery since comments last week from former Federal Reserve Chairman Alan Greenspan, who said the Chinese markets could experience a significant pullback.
In corporate news, Pulte Homes Inc. said late Tuesday it will slash about 16 percent of its work force, or about 1,900 jobs, to save the homebuilder an estimated $200 million a year before taxes. Shares of the company fell 13 cents to $27.32.
Bookseller Borders Group Inc. fell 98 cents, or 4.2 percent, to $22.34 after it reported late Tuesday a wider loss in the first quarter than in the year-ago period, citing a difficult sales climate.
IBM Corp. rose 17 cents to $106.08 after it laid off 1,570 people, primarily from an ongoing overhaul of operations in its giant technology services unit. The company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini.
And the takeover trend continued.
Late Tuesday, hardware, software and technology accessory distributor CDW Corp. confirmed that it will be bought by a private equity company for $7.3 billion. Shares of the company rose $2.15, or 2.6 percent, to $85.26.
ESpeed Inc., a publicly owned electronic trading house controlled by Cantor Fitzgerald, said it is buying BGC Partners, the New York bond-trading firm's privately held brokerage unit, in a $1.3 billion deal. Shares of eSpeed rose 17 cents to $9.36.
The dollar was mixed against other major currencies, while gold prices fell. Crude oil rose 31 cents to $63.46 per barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies was up 4.04, or 0.48 percent, at 841.57.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.09 billion shares.
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© 2007 AFX News
