NEW YORK, (Reuters):
STOCKS EDGED up yesterday after initially falling in reaction to the Federal Reserve's widely expected decision to stand pat on interest rates, which some analysts saw as a sign the economy may not be weakening further.
"The market is in an oversold condition. We've closed lower for about seven out of nine sessions and we were due for something like this bounce," said Robert Basel, senior trader at Salomon Smith Barney Inc. "It will not be until the close that I digest everything the Fed has said but on the surface of it, they did not say anything that's terribly negative or that is not known already."
The blue-chip Dow Jones Industrial average was up 24.55 points, or 0.30 per cent, to 8,113.39, having initially widened its losses a bit after the Fed decision.
The Standard & Poor's 500 index gained 6.15 points, or 0.72 per cent, to 864.69. The tech-loaded Nasdaq Composite gained 13.34 points, or 0.99 per cent, to 1,355.52.
Fed policymakers opted to keep U.S. interest rates at four-decade lows while they awaited the economic impact of a possible war with Iraq and big tax cuts. They said risks to the economy remained evenly balanced between higher prices and a renewed downturn, a stance adopted in November.
IMPROVEMENT IN THE ECONOMY
"It was as expected. The statement is continuing to focus on geopolitical risks and some improvement in the economy, at least after the geopolitical risks are out of the way," said Alan Ruskin, research director at 4Cast Ltd in New York.
"The Federal Reserve is looking to get past a war if there is one, and then look for signs that the economy is improving."
Earlier, stocks shed losses and moved into positive ground as investors looked for bargains in a market that had declined following a speech by President George W. Bush which fed fears that war against Iraq was close.
Mark Donahoe, managing director of institutional sales trading at U.S. Bancorp Piper Jaffray. said people are still digesting the Bush speech.
"There's not a lot happening. There's not a lot of institutional flow either way," he said. "People are sitting on the fence. there's still uncertainty out there. That's why, I think, the market's going nowhere and it's been down on balance."
Big movers included Rambus Inc., whose stock soared after a federal appeals court on yesterday dismissed Infineon's fraud claim against Rambus and breathed new life into the latter's claim that Infineon Technologies AG infringed its patents.
Rambus jumped 55 per cent, or US$4.12 to US$11.56 and Infineon lost 20 cents to US$7.10, or 2.7 per cent.
Drug makers such as Merck & Co. rose amid hopes that reform of the Medicare program, as Bush wants, will boost demand for prescription medicines. Semiconductor equipment stocks such as Novellus Systems Inc. rose handsomely and helped the Nasdaq, following upbeat comments from brokerage powerhouse Merrill Lynch on the firm.
Merck & Co., a Dow issue, up 93 cents to US$55.33 and Pfizer Inc., gaining 52 cents to US$30.52.
Bush, in his State of the Union speech on Tuesday night, announced a US$400 billion drive to reform Medicare and add a prescription drug benefit to the government programme that provides health coverage to elderly Americans.
Oil stocks emerged as a bright spot during the session as oil prices rose on the threat of war. Dow component Exxon Mobil Corp. jumped US$1.46, or 4.5 per cent, to US$34.12. BP Plc tacked on US$1.86, or 5 per cent, to US$38.35. ConocoPhillips rallied US$1.88, or 4 per cent, to US$47.79.
