NEW YORK, Jan 28 – US stocks ended higher Wednesday amid signs of no immediate tightening of monetary policy by the Federal Reserve, and ahead of President Barack Obama\’s State of the Union address.
The Dow Jones Industrial Average rebounded from early losses, rising 41.87 points (0.41 percent) to 10,236.16 as component companies of the blue-chip index posted mixed fourth-quarter earnings.
The Nasdaq composite rose 17.68 points (0.80 percent) to 2,221.41 while the Standard & Poor\’s 500 index climbed 5.33 points (0.49 percent) to 1,097.50.
Markets recouped losses after the Federal Reserve policy making body decided to keep its stimulative monetary policy unchanged Wednesday and said it expected to hold "exceptionally low" rates "for an extended period" to support the economic recovery.
Andrew Fitzpatrick of Hinsdale Associates said the first reaction was to sell, but that markets rose after digesting the Fed statement because there was no hint of raising rates or pulling back stimulus.
"When you look at the actual statement, it\’s very benign for the market. You have no news here, it\’s more or less a non-event and gives the market a chance to think we can keep the recovery going," he said.
"So I think it\’s generally positive."
The FOMC decision included one dissent, a departure from recent meetings, with Kansas City Fed president Thomas Hoenig believing that "the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted," the statement said.
Analysts said the dissent raises questions about whether the Fed is moving toward a so-called exit strategy from its extraordinary policies aimed at jolting the economy out of recession.
"The stock market took a while to decide, but eventually liked what it heard from the Federal Reserve today," said Wells Fargo Advisors senior equity market strategist Scott Marcouiller.
"The major averages turned higher in the final hour, led by bank stocks," he said.
The market also awaited Obama\’s State of the Union address late Wednesday when he is expected to chart a more "hopeful" future for Americans weary of economic deprivation and seek to rescue his ambitious plans for reform.
He is also tipped to touch on job creation, the key to long-term recovery, cap-and-trade global warming legislation, wide-ranging education reform and regulatory rules to halt risky business practices on Wall Street.
On the corporate front, the stock market reacted to better-than-expected results Wednesday from aerospace giant Boeing and the conglomerate United Technologies while heavy equipment maker Caterpillar came in with disappointing revenues.
Boeing flew higher by 7.31 percent to 61.93 dollars as it posted earnings for the fourth quarter of 1.268 billion dollars, swinging back to profitability on a surge in revenues.
United Technologies however fell 1.26 percent to 67.61 dollars after reporting a 6.3 percent drop in profits, capping an 18 percent earnings decline for the year, while warning of sluggish demand in 2010 that would keep "pressure on our top line."
Caterpillar, a key bellwether of the economy, slid 4.32 percent to 53.44 dollars, as it reported a sharp decline in earnings and disappointing revenues, and offered a cautious outlook.
On the tech front, Yahoo dipped 0.06 percent to 15.98 dollars even after it reversed losses of a year ago and posted its best quarterly net profit since Carol Bartz took over as chief executive of the Internet company.
Apple rose 0.94 percent to 207.88 dollars as the company unveiled a tablet computer it hopes will rival the popularity of the Macintosh computer, iPod and iPhone.
Bonds were mixed. The yield on the 10-year Treasury bond rose to 3.644 percent from 3.630 percent Tuesday and that on the 30-year bond declined to 4.553 percent against 4.566 percent. Bond yields and prices move in opposite directions.