Fear of a revived debt crisis in Europe faded from the stock market on Wednesday, freeing the Dow Jones industrial average to touch another milestone.
After falling Monday on concerns that Cyprus would become the latest European nation to stir fiscal chaos, the Dow posted its second consecutive day of gains.
Stocks traded steadily higher for most of the day and spiked after the Federal Reserve said it would continue with aggressive measures to support the economy. The Federal Reserve chairman, Ben S. Bernanke, said the crisis in Cyprus posed no major risk to the United States economy.
The Dow was up 44 points shortly before the Fed announcement. It rose as much as 91 points shortly after the Fed released its policy statement at 2 p.m., reaching a milestone of 14,546 at 2:25 p.m.
The Fed said the nation’s economy had strengthened after pausing late last year, but still needed support from the central bank. The Fed plans to continue buying $85 billion in bonds a month indefinitely to keep long-term borrowing costs down and encourage investment. It also said it would keep short-term interest rates at record lows, at least until unemployment falls to 6.5 percent.
Interest rates were higher. The Treasury’s benchmark 10-year note fell 16/32, to 100 12/32, and the yield rose to 1.96 percent from 1.90 percent late Tuesday.
Unemployment fell last month to 7.7 percent, the lowest level in four years. The Fed does not expect the rate to reach its target until 2015.
The Dow closed up 55.91 points Wednesday, or 0.4 percent, at 14,511.73.
Stock markets were little changed on Tuesday despite rising uncertainty in Cyprus. Anyone watching “would conclude that the market decided Cyprus is overblown as an issue,” said Brian Gendreau, a strategist at the Cetera Financial Group.
Mr. Gendreau said traders had been concerned about what precedent might be set by Cyprus’s efforts to avoid a crisis. A plan to seize money from bank savings accounts was met with outrage, and the nation’s Parliament rejected the proposal on Tuesday.
The nation’s unusual status as an international financial haven makes it an unlikely road map for future rescue efforts.
“I think the market’s going to start looking at other things,” he said.
Cyprus was negotiating with international lenders, seeking support for its ailing financial system. Without a bailout deal, Cyprus’s banks could collapse, devastating the country’s economy and potentially forcing it to exit the euro currency group. That could roil global financial markets.
Attention returned to Europe this week after several months’ respite, during which traders focused on the strengthening economy in the United States and drove stocks to multiyear highs.
Over the previous two years, concerns about a breakup of the euro currency often dominated trading of United States stocks. The jitters receded after central banks provided enough extra cash to help prop up Europe’s commercial banks.
Among stocks making big news was FedEx. The company reported sharply lower quarterly earnings and said it would cut capacity to Asia. FedEx sank $7.33, or 6.9 percent, to $99.13.
Adobe soared after reporting strong first-quarter earnings. The company, which makes Adobe Reader and Photoshop, said it had picked up more subscriptions to online versions of its software products. The stock rose $1.71, or 4.2 percent, to $42.46.
In other trading, the Standard Poor’s 500-stock index rose 10.37 points, or 0.7 percent, to 1,558.71. The Nasdaq composite index rose 25.09, or 0.8 percent, to 3,254.19.
The S. P. 500 is just six points below its milestone of 1,565, reached in October 2007. It is up 9.3 percent so far this year.
The Dow is up 10.7 percent for the year. From March 1 through March 14, the index had a 10-day winning streak — its longest since 1996. The Dow rose 484 points, to 14,539, during that period. After a two-day dip on Friday and Monday, the Dow has added 60 points to 14,511.
Article source: http://www.nytimes.com/2013/03/21/business/daily-stock-market-activity.html?partner=rss&emc=rss
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