Market Rises for Third Day, Encouraged by Fed’s Outlook

Posted by Unknown on Wednesday, April 30, 2014

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Business Day |Market Rises for Third Day as Fed’s Move Trumps Growth Report

http://nyti.ms/1mXXmrW

The stock market posted its third straight day of gains on Wednesday, with the Dow Jones industrial average reaching its first nominal high this year, as good news about the economy narrowly outweighed the bad.

Investors were encouraged by the Federal Reserveâ€™s optimistic reading of the economy, shrugging off an unexpectedly weak reading on first-quarter economic growth.

The Dow rose 45.47 points, or 0.3 percent, to 16,580.84, four points above its previous record, which was set on Dec. 31. This was the first time it moved into positive territory for the year.

The Standard & Poorâ€™s 500-stock index rose 5.62 points, or 0.3 percent, to 1,883.95. The Nasdaq composite index rose 11.01 points, or 0.3 percent, to 4,114.56.

Stocks started the day lower after the government reported that the economy stalled in the first three months of the year as winter storms chilled business activity. The Commerce Department said growth slowed to a barely discernible 0.1 percent annual rate in the first quarter, less than the rate of 1.1 percent forecast by economists, according to FactSet.

The Dow Minute by Minute

Position of the Dow Jones industrial average at 1-minute intervals yesterday.

The marketâ€™s reaction to the report was muted because most investors expect the slowdown to be temporary as growth rebounds along with warmer weather.

â€œMost people, including us, expected March to have been the strongest month of the first quarterâ€ and believe that growth will continue to pick up, said Sean Lynch, global investment strategist for Wells Fargo Private Bank. â€œThatâ€™s an O.K. environment for the market.â€

Stocks climbed higher in the afternoon after the Fed, giving a positive view of the economy, said it would reduce its monthly bond purchases by another $10 billion, to $45 billion. â€œGrowth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions,â€ the Fedâ€™s policy makers said in their statement.

Among the stocks on the move, Pepco Holdings surged $3.97, or 17.4 percent, to $26.76 after it agreed to be acquired by Exelon for $6.8 billion, creating a large electric and gas utility in the Mid-Atlantic region.

Sealed Air rose $1.72, or 5.3 percent, to $34.31 after the food packaging companyâ€™s earnings easily beat Wall Streetâ€™s expectations.

Twitter fell $3.65, or 8.6 percent, to $38.97 after its customer growth disappointed investors when it reported quarterly results late Tuesday.

Express Scripts, the nationâ€™s largest pharmacy benefits manager, fell $4.43, or 6.2 percent, to $66.58 after it lowered its earnings guidance for the year, saying that it would handle a lower volume of prescriptions.

More than 60 percent of S.&P. 500 companies have reported first-quarter earnings. Analysts currently expect earnings to grow by 1.7 percent in the period, according to S&P Capital IQ data. That compares with growth of almost 8 percent in the fourth quarter and 5.2 percent in the same period a year ago.

In the bond market, interest rates dropped. The yield on the 10-year Treasury note fell to 2.65 percent from 2.70 percent late Tuesday, while its price rose 14/32, to 100 29/32.

As bond yields remain relatively low, stocks will most likely remain attractive to investors, said David Kelly, chief global strategist at JPMorgan Funds. â€œWhat else are you supposed to do with your money?â€ Mr. Kelly said. â€œFor lack of something better to do with it, money is going to move back into equities.â€