U.S. Stocks Surge on Prospect That Fed Will Stop Raising Rates...

U.S. Stocks Surge on Prospect That Fed Will Stop Raising Rates
April 18 (Bloomberg) --

U.S. stocks staged their biggest rally in a year after the latest Federal Reserve minutes encouraged speculation that the 21-month-old policy of higher interest rates may be coming to an end.

Commodity producers including Freeport-McMoRan Copper & Gold Inc. and Exxon Mobil Corp. set the pace as oil and metal prices reached records.

Minutes from a Fed policy meeting showed the central bank may soon stop raising rates after doing so 15 times since June 2004. The release of the minutes extended a rally that started after a government report showed prices paid to producers rose less than forecast last month, excluding food and energy.

``Moderate growth and moderate inflation is what the Fed is telling the market it is seeing,'' said Joseph Quinlan, who helps manage $457 billion as chief market strategist at Bank of America Capital Management in New York. ``That's a bullish scenario for stocks.''

The Standard & Poor's 500 Index rose 22.32, or 1.7 percent, to 1307.65 and the Dow Jones Industrial Average climbed 194.99, or 1.8 percent, to 11,268.77. The Nasdaq Composite Index increased 44.98, or 2 percent, to 2356.14. All three indexes had their biggest jump since April 21 of last year.

The Russell 2000 Index, a benchmark for smaller companies, rose 2.7 percent to 769.81, its best gain since December 2003.

Energy stocks rallied as crude oil touched an all-time high of $71.60 a barrel in New York. Metal producers surged as copper had the largest one-day advance since 1996 and Freeport-McMoRan reported that first-quarter profit soared.

Stock indexes may extend gains tomorrow after results from Yahoo! Inc. and Texas Instruments Inc. exceeded investors' expectations after the close of trading.

Fed Minutes

More than seven stocks rose for every one that fell on the New York Stock Exchange, the broadest rally since May 2004. Some 1.84 billion shares changed hands on the Big Board, 12 percent more than three-month average.

``Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much given the lags in the effects of policy,'' the minutes from Fed Chairman Ben S. Bernanke's first meeting said. ``Members also recognized that in current circumstances checking the upside risks to inflation was important.''

The Fed raised rates to 4.75 percent at that March 28 meeting. Traders cut the odds that the Fed's benchmark rate will rise to 5.25 percent at policy makers' next two meetings. Futures trading now gives a 34 percent chance of that happening at the Fed's June meeting, down from 58 percent last week.

Janet Yellen, head of the Fed's San Francisco bank, added to the enthusiasm after saying in a speech in San Jose, California, that she is ``highly alert'' to the chance the central bank will raise interest rates by too much.

`More Dovish'

``It looks like the Fed is more dovish, which is great for the markets,'' said Steve Neimeth, who helps manage about $1 billion at AIG SunAmerica Asset Management in Jersey City, New Jersey. ``What they're seeing with inflation is alleviating investors' concerns about higher oil prices.''

The Goldman Sachs Commodity Index rose to an all-time high as concern over Iran's nuclear program sent the price of oil surging and speculation about higher demand in China stoked buying of metals by investment funds. The index comprises 24 commodities, including precious metals and agricultural products.

Gold for June delivery reached $623.30 an ounce, the highest since December 1980. Copper for delivery in three months rose as much as 5.9 percent to a record $6,500.30.

An index of raw-material producers jumped 2.7 percent, its biggest rise since March 2005 and best performance among 10 industry groups in the S&P 500.

Freeport-McMoRan Climbs

Freeport-McMoRan jumped $4.38, or 6.7 percent, to $69.57. Profit after payment of preferred dividends climbed to $1.23 a share, while sales rose 35 percent to $1.09 billion. Analysts, on average, expected 88 cents and $927.4 million, respectively, according to Thomson Financial.

An index of energy shares rallied 2.5 percent for the second-biggest industry gain in the S&P 500. Exxon, the world's largest company by market value, rose $1.49 to $63.54.

Wholesale prices excluding energy and food rose at the slowest pace in four months in March, increasing 0.1 percent, the Labor Department said. Economists expected an increase of 0.2 percent in a survey by Bloomberg. Total prices expanded 0.5 percent.

Housing starts declined 7.8 percent in March to an annual rate of 1.96 million, a 12 month-low, the Commerce Department said, as rising mortgage rates and record inventories of unsold homes discouraged new projects.

Merrill, Trust Banks

Merrill Lynch & Co. rose 92 cents to $79.38. The world's largest securities firm said first-quarter profit was 44 cents a share, more than the 32 cents analysts expected, on average, in a survey by Thomson. Gains in trading, investment banking and brokerage commissions boosted revenue to a record $7.96 billion.

Trust banks including State Street Corp. and Northern Trust Corp., which provide services for institutional investors, climbed as first-quarter earnings exceeded analysts' estimates.

State Street advanced $4.36, or 7.2 percent, to $64.56. The No. 1 provider of services for large investors said profit rose 29 percent on an increase in fees from managing money and trading currencies. Per-share earnings were 87 cents, while analysts including Ryan, Beck & Co.'s Jacqueline Reeves expected 77 cents.

Northern Trust

Northern Trust rose $4.50, or 8.5 percent, to $57.26 for the biggest gain in the S&P 500. The firm, which manages $652.8 billion, said net income climbed to 74 cents, bolstered by new contracts for its custody services. Analysts in a Thomson survey expected 67 cents, on average.

Manpower Inc. gained $4.41 to $60.71. The world's second- largest provider of temporary workers said first-quarter profit was 59 cents a share, beating the 38-cent average analyst estimate in a Thomson survey. Results from Germany, Italy and Japan helped boost earnings 63 percent to $52.6 million.

Robert Half International Inc., the biggest U.S. temporary- worker provider, added $2.36 to $40.48.