Wall Street put aside its worries over interest rates Monday and managed a halfhearted rally the day before a key Federal Reserve meeting.
But the good news didn’t extend to the commodities market, where the price of oil rose to its highest level in more than 13 years and the wholesale price of gasoline hit a record high.
Although a rate hike is not expected at Tuesday’s meeting, the Fed’s statement afterward is certain to be thoroughly dissected by Wall Street. As the economy continues to grow at a rapid pace, most investors expect a rate increase by August to combat inflation.
“The Fed is going to telegraph its intentions for the market in its statement tomorrow,” said Keith Keenan, vice president of institutional trading at Wall Street Access. “I can’t imagine they’d shock the market with a hike, but rather they’ll get everyone ready for something in June or August.”
The Dow Jones industrial average rose 88.43 points, to 10,314.00. The Standard & Poor’s 500 index gained 10.19, to 1117.49. The tech-heavy Nasdaq composite index advanced 18.57, to 1938.72. All three indexes rebounded from losses last week.
“I don’t think this was so much about the economic data. I think the market was just oversold coming into today,” said Russ Koesterich, U.S. equity strategist at State Street Corp.
The Commerce Department reported that construction spending jumped 1.5 percent in March from February, to a seasonally adjusted annual rate of $944.1 billion, the highest level on record. The increase was three times higher than economists expected.
The value of residential projects being worked on by private builders reached an annual rate of $507.2 billion, also a record high. “This is just further confirmation that there is going to be good corporate profits in the manufacturing and housing sectors,” said John E. Silvia, chief economist at Wachovia Corp.
In a separate report, the Institute for Supply Management said its manufacturing index slipped to 62.4 in April from 62.5 in March. Analysts had forecast a reading of 62.7. The institute said higher prices for certain commodities, such as aluminum and steel, were causing difficulties for manufacturers.
But the manufacturing index “is still at a very high level, and this was an insignificant change,” said Alexander Paris, market analyst for Chicago-based Barrington Research.
Interest rate concerns kept the market down most of April, causing many investors to ignore very strong corporate earnings, analysts said.
“We’re telling our clients to take a look at the fundamentals, and the fundamentals are sound,” said Brian Belski, market strategist at Piper Jaffray.
Signs of life in the technology sector helped semiconductor stocks. Global sales rose 32 percent in March from the year-ago period, according to an industry report. Chipmaker Intel gained 31 cents, to $26.04.
Adobe Systems adjusted its second-quarter outlook, saying the company would exceed previous estimates. Adobe jumped $2.50, or 6 percent, to $44.00.
Symantec, the world’s largest maker of anti-virus computer software, gained $1.98, to $47.03. A computer worm called Sasser is spreading to corporate networks from home personal computers and laptops.
Oil and gas stocks surged. EOG Resources advanced $2.90, or 6 percent, to $52.15. The gain was the biggest among 27 oil and gas stocks in the S&P 500. Anadarko Petroleum climbed $2.53, to $56.11. Exxon Mobil added $1.13, to $43.68.
The Energy Department said the average price for a gallon of unleaded gasoline increased 3.2 cents during the past week, to $1.844, the fifth record in six weeks. And the jump in oil and gas prices signaled the likelihood of higher pump prices by Memorial Day, the beginning of the summer driving season.
Crude for June delivery gained 83 cents on the New York Mercantile Exchange, settling at $38.21 per barrel, as traders responded to the weekend killing of five Westerners working for an oil contractor in Saudi Arabia. That’s the highest settlement price since Oct. 16, 1990.
Unleaded gasoline futures increased 2.7 cents, to $1.262 a gallon, the highest settlement on record since the contract started trading in December 1984.
