U.S. stocks end higher on German court ruling
NEW YORK (MarketWatch) -- U.S. stocks finished modestly higher Wednesday after a German court declined to block a euro-area rescue fund and as investors mulled the possibility of further stimulus from Federal Reserve Chairman Ben Bernanke and his colleagues.
"The German court ruling that they would stand behind a euro-zone rescue fund was received positively; there was some fear that Germany would not be so supportive," said Matt Kaufler, portfolio manager at Federated Investors.
"There is also some optimism that we're going to get QE3, although I don't personally believe it's going to happen. My read of the tea leaves has been that Bernanke would rather jawbone and use language at this point to steer things as opposed to getting involved in another QE operation," said Kaufler, referring to a possible third round of quantitative easing.
"He'd like to see the nation's economic problems addressed by getting fiscal policy right. He'd very much like to see that side of the equation get addressed," Kaufler added of Bernanke.
The Dow Jones Industrial Average (DJIA) rose 9.99 points, or 0.08%, to close at 13,333.35, its highest finish since December 2007.
The Nasdaq Composite (COMP) added 9.78 points, or 0.3%, to 3,114.31.
The S&P 500 index (SPX) gained 3 points, or 0.2%, to 1,436.56, with telecommunications rising the most and consumer staples the greatest laggard among its sectors.
For every stock falling nearly two gained on the New York Stock Exchange, where almost 664 million shares traded. Composite volume topped 3.6 billion.
Equities gained along with the euro (EURUSD) , which hit a four-month high, after Germany's top court backed the euro-area rescue fund to help stem the region's debt crisis.
"Buy the rumor, buy the news continues to be the market pattern as long as participants have their central-bank beer goggles on, which turns all news into good news," said Peter Boockvar, an equity strategist at Miller Tabak, in an email.
Economic data Wednesday had import prices rising 0.7% in August, with the first gain in five months attributed to the increased cost of imported oil.
On the New York Mercantile Exchange, crude futures (CLV2) fell 0.2% to end at $97.01 a barrel after weekly supply data revealed an unexpected rise in U.S. inventories.
On Thursday, the Fed could signal a third round of bond purchases when it ends a two-day policy-setting session.
In light of Bernanke's stated concern about the labor market, "you have to assume he's going to do something here," said Bruce Bittles, chief investment strategist at RW Baird & Co.
Federated Investors's Kaufler, however, believes Bernanke will stand pat and refrain from launching another large-scale round of bond purchases, given the overall trend in the labor market.
"While the level is undesirable, unemployment has been coming down at a very slow pace. We were at 10% and now we're at 8.1%," Kaufler said.
It's widely expected that the Fed will extend the length of its record-low interest-rate policy into 2015 as it strives to bolster the recovery and help reduce the nation's unemployment rate.
"There is always the risk Bernanke may not do anything, so I am not surprised the market is being a little cautious," said Bittles of Wednesday's limited gains.