US stocks up but investors fear Fed cuts

US stocks rose yesterday but ended well off their highs as investors speculated over the Federal Reserve’s intentions about its massive stimulus programme to aid the economy before a meeting of policymakers that begins today.

Major indexes climbed from the start of the session and were more than one per cent higher for much of the day, recovering all of last week’s losses, on the view that the Fed would reaffirm its policies of supporting the economic recovery at the end of th two-day meeting.

However, reports suggested that the Fed was likely to signal that a move to reduce the programme was close.

“We’re held hostage in front of comments about what the direction for stimulus is, and the market is always more volatile when it is in front of the information flow,” said Dan Veru, of Palisade Capital Management in Fort Lee, New Jersey.

Stocks also were supported by economic data that showed homebuilders were more confident and business activity in the New York Fed’s district had expanded in June.

The Dow Jones industrial average was up 109.74 points, or 0.73 per cent, at 15,179.92. The Standard & Poor’s 500 Index was up 12.36 points, or 0.76 per cent, at 1,639.09. The Nasdaq Composite Index was up 28.58 points, or 0.83 per cent, at 3,452.13.

Volatility has spiked since 22 May when Fed Chairman Ben Bernanke said the Fed could reduce the pace of its stimulus in the “next few meetings” if the economy showed continued improvement.