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Stocks rise before elections, Fed meeting

Stocks rise before elections, Fed meeting

Stocks rose Tuesday as investors moved into riskier assets following a steep drop in the dollar, putting the Dow Jones industrial average near its highest point of the year.
The Dow Jones industrial average rose more than 70 points in early afternoon trading. The Dow has come close to ending above its April high of 11,205 four times in the past two weeks, but each time the gains have faded late in the day.
Uncertainty over the effects of the midterm elections and the size of the Federal Reserve's expected stimulus program due out Wednesday have kept the market from ending with either big gains or losses in recent days.
Eric Thorne, an investment adviser with Bryn Mawr Trust Wealth Management, said many traders have been using the end of the day to take short-term profits because the U.S. economy remains weak so there is no guarantee stocks will continue to climb.
An expected win for Republicans in the House of Representatives could set up a scenario that leads to gridlock on Capitol Hill, meaning there could be a slowdown in new government spending and regulatory reform.
Exactly how the election will play out is still uncertain, which is part of the reason stocks have wavered recently. Analysts say companies have avoided hiring new workers because of questions surrounding taxes and costs associated with health care and financial regulatory overhauls. Election results could provide some more clarity about those issues.
High unemployment remains one of the biggest obstacles to a strong recovery. The government said last week that the gross domestic product, the broadest measure of the nation's economy, grew at a 2 percent annual rate during the third quarter. That's well short of what is needed to create a significant amount of jobs.
Traders are also waiting for the Federal Reserve to wrap up a meeting where it is expected to announce plans to stimulate the economy. There is uncertainty about exactly how big a bond-buying program the Fed will announce, which has also tempered movements in stocks in recent days.
The Fed's purchase of Treasurys hurts the value of the dollar. A weaker dollar, in turn, drives the price of commodities like gold and oil higher. Materials and energy stocks, including Freeport-McMoRan Copper & Gold Inc., Chevron Corp. and Alcoa Inc., all rose about 1 percent following commodity prices higher.
The Dow rose 70.08, or 0.6 percent, to 11,194.70 in early afternoon trading.
The Dow closed at 11,205.03 on April 26. Closing above that level would give the Dow its highest close since September 2008, just before the financial crisis erupted.
The broader Standard & Poor's 500 index rose 8.09, or 0.7 percent, to 1,192.47. The S&P 500, which is more closely watched than the Dow by professional investors, is still below its 2010 high of 1,217, which it reached on April 23.
The Nasdaq composite index rose 20.31, or 0.8 percent, to 2,525.15.
The euro rose back above $1.40 and the dollar fell against the yen. The dollar continues to hover near a 15-year low against Japan's yen.
The Australian dollar rose just above $1.00 as the country's economy and currency benefit from rising commodity prices.
Bond prices rose slightly as investors anticipate the Fed ramping up purchases of government debt in the coming days. That drove the yield on the benchmark 10-year Treasury note down to 2.60 percent from 2.63 percent late Monday.
In corporate news, General Motors is expected to raise $10 billion in an initial public offering as it emerges from a government-funded bankruptcy reorganization. The offering will reduce the government's stake in the automaker to less than 50 percent and much of the money will go toward paying back the government bailout.
Pfizer Inc. shares dipped after its third-quarter revenue fell short of forecasts. It did, however, beat profit forecasts for the quarter and the pharmaceutical company raised its full-year outlook.


Updated : 2021-06-15 02:19 GMT+08:00