Stocks rise on hopes for more stimulus from Fed
Tuesday, August 30, 2011
NEW YORK (AP) — The mere discussion of more economic stimulus from the Federal Reserve was enough to send stocks higher Tuesday. The Dow Jones industrial average rose 20 points, its third day of gains.
Minutes from the Fed’s latest policy meeting on Aug. 9 showed that central bank officials discussed a variety of options to bolster the economy, including buying more Treasury bonds. In the end, they decided to keep interest rates low until at least mid-2013.
The news that more aggressive action was being considered gave investors a reason to buy stocks.
The Federal Reserve has purchased Treasury bonds twice in the past as a way to keep long-term interest rates low. The Fed’s first bond-buying program was in 2008, at the height of the financial crisis. The second, announced last August, helped to push the Dow up 28 percent through April 29. Lower interest rates on bonds give investors an incentive to move money out of bonds and into stocks and other assets.
Stocks were mixed for much of the day Tuesday after an index of consumer confidence plunged in August to the lowest level since April 2009. Trading volume was also lighter than normal because many investors are on vacation.
The Dow Jones industrial average rose 20.70 points, or 0.2 percent, to close at 11,559.95 Tuesday. The Dow was down as many as 109 points five minutes after the consumer confidence report came out at 10 a.m. It traded mixed for most of the day and turned higher in the last hour of trading.
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