Markets & Finance

Stocks Rise Before Fed Decision


Crude futures rebounded near $57, while Merck, 3M, P&G, and others posted mixed quarterly results. The Fed kicked off its two-day policy meeting

Stocks finished higher Tuesday, as surging oil prices boosted energy shares and the Federal Reserve kicked off its two-day policy meeting. Consumer confidence posted a third straight monthly increase, while earnings reports came in mixed. Some market pros expect the Fed's policy statement Wednesday to take a more hawkish tone on inflation, says Standard & Poor's Equity Research.

On Tuesday, the Dow Jones industrial average rose 32.53 points, or 0.26%, to 12,523.31. The broader Standard & Poor's 500 index added 8.2 points, or 0.58%, to 1,428.82. The tech-heavy Nasdaq composite was up 7.55 points, or 0.31%, to 2,448.64.

NYSE breadth was decidedly positive, with 24 issues advancing for every 10 declining. Nasdaq breadth was 18-12 positive.

Oil prices climbed Tuesday, supporting corresponding stocks. In the energy markets, March West Texas Intermediate crude oil futures rose $2.89 to $56.90 a barrel amid cold temperatures in the Northeast and speculation of an OPEC output cut.

In economic news, the Fed began its two-day interest-rate meeting. With central bankers widely expected to leave interest rates unchanged, focus will be on Wednesday's policy statement.

The U.S. consumer confidence index rose in January to 110.3, its best since 2002, from an upwardly revised 110.0 in December. Separately, the U.S. ICSC-UBS chain store sales index dropped 0.9% in the week ended Jan. 27, after edging up 0.1% a week earlier.

Looking ahead, the Fed announcement highlights Wednesday's calendar. The economic docket also holds data on fourth-quarter economic growth, December construction spending, and Chicago-area manufacturing activity.

A stream of earnings reports was also in the spotlight Tuesday. Merck (MRK) was lower after the drugmaker said fourth-quarter earnings tumbled 58% and affirmed its full-year profit outlook.

Fellow Dow component 3M (MMM) was down after the conglomerate's 58% jump in fourth-quarter profit missed Wall Street expectations.

Procter & Gamble (PG) was modestly lower after the consumer products maker posted a 12% gain in profits for its fiscal second quarter and lifted its full-year outlook.

On the upside, Colgate Palmolive (CL) was higher after the toothpaste, soap, and pet-food maker reported a 11% rise in fourth-quarter net income.

U.S. Steel (X) was higher after the steel maker said its fourth-quarter profit more than doubled.

Companies slated to announce quarterly results Wednesday include Altria (MO), Eastman Kodak (EK), and Google (GOOG).

In analyst calls, Alcoa (AA) was higher after Morgan Stanley upgraded the aluminum maker from equal weight to overweight.

Starbucks (SBUX) was slightly higher after J.P. Morgan upgraded stock from neutral to overweight.

Elsewhere, Motorola (MOT) was sharply higher on news billionaire investor Carl Icahn is seeking a seat on the cell-phone maker's board of directors.

Microsoft (MSFT) edged down as retailers began selling the company's new, long-awaited Windows Vista operating system.

Meanwhile, Delta Air Lines (DALRQ.PK) said it has secured $2.5 billion in exit financing as it aims to emerge from bankruptcy.

European markets finished higher. The FTSE-100 index in London edged up 2.1 points, or 0.03%, to 6,242. Germany's DAX index rose 62.22 points, or 0.93%, to 6,788.23. In Paris, the CAC 40 index added 25.89 points, or 0.46%, to 5,645.59.

Asian markets ended higher. In Japan, the Nikkei 225 index gained 19.73 points, or 0.11%, to 17,490.19. In Hong Kong, the Hang Seng index cimbed 223.78 points, or 1.11%, to 20,460.46. Korea's Kospi index advanced 7.62 points, or 0.56%, to 1,370.72.

Treasury Market

Treasury yields drifted lower, withstanding the increase in consumer confidence as the Fed began its policy meeting. The 10-year note nudged higher in price to 98-01/32 for a yield of 4.88%, while the 30-year bond rose modestly to 92-19/32 for a yield of 4.98%. Short-covering and cool inflation data from Germany also likely contributed to the higher Treasury prices, says S&P.

Hogan is a reporter for BusinessWeek.com in New York.

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