Stocks advance on rate-cut hopes
The Russell 2000 (NYSE: IWM) and the Dow Jones Industrial Average (INDU) are continuing to advance as hopes continue to mount for a Fed rate-cut following weaker than expected manufacturing activity for the month of August.
Indices tacked on to Friday’s gains. At 12:50 p.m. ET the small-cap index had added 5.73 points, or 0.72%, to 798.59. The Dow was up 38.28 points, or 0.29%, to 13,396.02.
The Institute for Supply Management’s manufacturing index fell to 52.9 from last month’s 53.8. Economists were forecasting the index would decline to 53. A reading over 50 indicates expansion. The index has remained above 50 since January.
Friday, stocks bolted higher after investors interpreted Fed Chairman Ben Bernanke’s statement, in which he said that that central bank would be ready to "act as needed" to thwart any eroding affects of the credit debacle on the economy, to indicate a probable rate cut. President Bush also gave jittery investors hope by announcing a plan to for government agencies to offer greater support for any overload in mortgage defaults.
The Federal Reserve is expected to hold its Federal Open Market Committee monthly meeting on September 18.
In other economic news this morning, the Census Bureau reported that construction spending fell to -0.4% for the month of August from July’s -0.3%. Economists had forecasted spending would contract to -0.1%.
Automakers are reporting sales for the month of August throughout the day. The second-largest car maker in the U.S, Ford Motor Co. (NYSE: F), reported that its U.S. auto sales fell 14% in August, decreasing for the tenth month in a row. Sales figures for General Motors (NYSE: GM), Chrysler (NYSE: DAI) and Toyota (NYSE: TM) will be released later in the afternoon.
In business news, Local.com (Nasdaq: LOCM) gained $0.62, or 10.46%, to $6.55 after the localized online search engine reported that it has renewed a multi-year distribution relationship with Yahoo! Inc (Nasdaq: YHOO).
NovaStar Financial (NYSE: NFI) toppled $1.57, or 18.49%, to $6.92 after announcing the Kansas City-based subprime mortgage lender said it will fire 275 retail lending employees and eliminate 12 retail offices.
Elsewhere, crude oil futures gained $0.76 to tread above the $74 level.
