Traders Waits, stocks Up, whats up?
Investors would ideally prefer a shift in posture toward cutting rates; such a move could boost consumer spending and make mortgages cheaper. But they appeared to be content to hear the status quo for now, and are tentatively optimistic that a rate hike isn’t in the offing given that recent economic data has shown slowing growth and that inflation, though high, hasn’t been running rampant. More talk of acquisitions also supported stocks Tuesday. An investment group that included Affiliated Computer Services’ founder and chairman made an offer to take the company private, while teen accessory retailer Claire’s Stores Inc. said it agreed to a $3.1 billion takeover proposal from New York-based private equity firm Apollo Management LP. Also, speculation arose over media reports on other deals: that Palm Inc. is a takeover target for both Nokia Corp. and a private equity investor, and that American International Group Inc. could be attempting to acquire Prudential PLC. Affiliated Computer Services rose $8.66, or 16.9 percent, to $59.95. The dollar dropped to 117.25 Japanese yen from 117.59 yen. It also fell against the British pound, which rose to $1.9609 from $1.9443. The Fed meets Tuesday and Wednesday and is widely expected to leave rates unchanged out of concern that the sluggish U.S. economy has not sufficiently dampened inflation pressures. Two closely watched gauges of inflation at the wholesale and retail levels showed big gains in February. Worries over the flagging housing market, particularly the subprime mortgage industry, have been dragging down stocks over the past month. But investors got some reassurance Tuesday from a Commerce Department report that construction of new homes rose by 9% in February to a seasonally adjusted annual rate of 1.525 million units, higher than the expected 1.450 million. The data wasn’t all positive — applications for building permits dropped — but not at all suggestive that the sector is collapsing. |
