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biggest gain since 2003
MARKET SNAPSHOT
Stocks stage a major rally after Fed
Portfolio managers also make additions as quarter's end nears
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By Leslie Wines, MarketWatch
Last Update: 4:34 PM ET Jun 29, 2006

NEW YORK (MarketWatch) -- U.S. stocks staged a major rally Thursday, with the Dow Jones Industrial Average surging 217 points, after a Federal Reserve statement was seen as signaling that an end to the rate-tightening cycle is near.
The Dow Jones Industrial Average ($INDU :
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Last: 11,190.80+217.24+1.98%
4:30pm 06/29/2006
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$INDU11,190.80, +217.24, +2.0% ) closed up 217.24 points, or almost 2%, at 11,190.80, marking its biggest one-day point gain since April, 2003, with all of its 30 components in positive territory.
The S&P 500 Index ($SPX :
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Last: 1,272.87+26.87+2.16%
5:00pm 06/29/2006
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$SPX1,272.87, +26.87, +2.2% ) rose 26.87 points, or 2.1%, to 1,272.87, its largest one day point gain since March, 2003, while the Nasdaq Composite Index ($COMPX :
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Last: 2,174.38+62.54+2.96%
6:18pm 06/29/2006
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$COMPX2,174.38, +62.54, +3.0% ) also turned in its best one day rise since March, 2003, rising 62.54 points to 2,174.38.
Chart of $COMPX
Breadth was overwhelmingly positive. Some 1.88 billion shares traded on the New York Stock Exchange, where rising stocks outnumbered falling shares by more than 27 to four. In the Nasdaq market, about 2.23 billion shares traded, with stocks on the rise outpacing declining shares by about four to one.
Prices were higher throughout the day, but shot to new highs after the Fed lifted the overnight rate to 5.25%, marking the 17th straight time it has done so.
Investors reacted well to major changes to the explanatory statement. The committee removed the phrase that some further measured policy firming "may" be needed. Instead, the FOMC said "any additional firming that may be needed" will depend on the economic outlook.
Barry Hyman, equity market strategist at EKN Financial Services said: "The Fed is still concerned about inflation, but also seems to be pointing toward an ending of the rate-hike cycle."
He added the change might not mean that the Fed will not put in another quarter-point increase at its August meeting, but clearly shows that an end is approaching.
However, Bill Tedford, fixed-income strategist at Stephens Capital Management, said the statement carried a strong hint that the Fed is through lifting rates.
Tedford pointed to the fact that the statement directly said growth is moderating; the most previous statement merely said growth could be moderating. "I do not anticipate the Fed hiking rates in a moderating economy," he said.
Mike Holland of the Holland Balanced Fund said that the statement's language alleviated investor fears. "Earlier there had been fears that the statement might be goofy, but the wording here is responsible and does not lend to an interpretations that the Fed will do something to screw up the economy."
Stocks also benefited from some end-of-quarter purchasing to shore up the value of portfolios. Friday marks the final session of June and for the second quarter.
Investors also eyed two new data reports that pointed toward a healthy economy. First-quarter gross domestic product was revised for a final time to show a 5.6% increase, the fastest rate of growth in about three years and stronger than the 5.5% gain expected by economists polled by MarketWatch.
Economists now expect growth to soften to around 3% for the next few quarters, close to the economy's long-run, noninflationary speed limit.
Core consumer-price inflation rose at a 2% annual rate during the quarter, down from 2.4% in the fourth quarter.
Initial jobless claims in the latest week rose by 4,000 to 313,000, while the four-week average of new claims dropped by 6,000 to 305,500, the lowest since Feb. 25. Analysts polled by MarketWatch had expected a rise to 311,000.
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The dollar drooped to one-week lows against the euro and yen because the language was not more hawkish. The dollar last was 1.3% lower at 114.96 yen, as the euro rose 0.8% to $1.2644. See currencies.
Treasurys closed higher, as the fixed-income market also was cheered by the possibility of an end to rate-tightening cycle.