US STOCKS advanced for a second straight day yesterday as investors bet the Federal Reserve would temper statements which were interpreted to mean a sooner-than-expected winding down of stimulus efforts.
Strong market breadth showed an increased appetite for equities, but trading volume was light, a sign that many market participants were taking a wait-and-see attitude.
The Fed’s two-day policy meeting started yesterday, and traders are trying to guess its timeline for scaling back purchases of $85bn per month of bonds.
The policy, known as quantitative easing, has helped fuel stocks’ rally, taking major indexes to record levels. The S&P is about one per cent away from its all-time closing high.
The Fed has said its goal is to target its benchmark interest rate near zero to lower the unemployment rate to 6.5 per cent as long as inflation stays below 2.5 per cent.
A policy statement from the central bank will be released Wednesday, and investors expect the current level of purchases will be maintained despite strong recent data pointing to improvements in the economy. Fed Chairman Ben Bernanke recently said the program would be wound down when the economy is strong enough, causing a surge of volatility in financial markets.
The Dow Jones industrial average was up 138.38 points, or 0.91 per cent, at 15,318.23. The Standard & Poor’s 500 Index was up 12.76 points, or 0.78 per cent, at 1,651.80. The Nasdaq Composite Index was up 30.05 points, or 0.87 per cent, at 3,482.18.
About two-thirds of companies traded on both the New York Stock Exchange and Nasdaq rose, with both exchanges seeing more than 150 securities hit 52-week highs, including 3M Co.