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Wall Street Takes Fed Minutes in Stride

Published in The New York Times


By Christine Hauser

Oct. 12, 2010

Shares on Wall Street rose slightly on Tuesday after the Federal Reserve revealed some of its disagreements about providing additional stimulus to the lagging economy.

The minutes of the most recent meeting of the Federal Open Market Committee, released at midday, showed that some Fed officials “consider it appropriate to take action soon,” while others “saw merit in accumulating further information before reaching a decision.”

The minutes indicated that the Fed was ready to enact another round of quantitative easing, said Peter Cardillo, the chief market economist for Avalon Partners. “But it is not a question of when, but of how much.”

The market was trading lower or mixed throughout most of the day, easing back from a five-month high last week when the Dow Jones industrial average rose above 11,000 for the first time since May

On Tuesday, stocks rose slightly after the minutes of the Sept. 12 meeting were released, but then fell back again. Analysts said that the release confirmed what the market had already expected: that additional monetary policy easing was only a matter of time.

Jeffrey N. Kleintop, chief market strategist at LPL Financial, said the text suggested that the Fed would announce something on Nov. 3.

The Dow Jones industrial average rose 10.06 points, or 0.09 percent, to 11,020.40. The broader Standard & Poor’s 500-stock index was up 4.45 points, or 0.38 percent, at 1,169.77, while the Nasdaq composite index rose 15.59 points, or 0.65 percent, to 2,417.92.

“It was definitely not a market mover,” said Alan B. Lancz, the president of Alan B. Lancz & Associates. “It definitely wasn’t a surprise, and I think a lot of it has been priced in.”

Before the release of the minutes, the president of the Federal Reserve Bank of Kansas City, Thomas M. Hoenig, questioned the benefit of further quantitative easing. “First, without clear terms and goals, quantitative easing becomes an open-ended commitment that leads to maintaining the funds rate too low and the Federal Reserve’s balance sheet too large,” Mr. Hoenig said in a speech in Denver. “The result is a further misallocation of resources, more imbalances and more volatility.”

Mr. Hoenig opposed the decision made in August to reinvest proceeds from mortgage-related securities in new purchases of government debt.

Some analysts cautioned against reading too much into the Fed report and said that developments in Asia and corporate earnings would probably generate most of the inspiration among traders.

As for other catalysts, Mr. Lancz said that recent mergers and acquisitions were “still on investors’ radar.”

Before the markets opened in New York, Pfizer, the pharmaceutical company, announced that it would buy the pain drug maker King Pharmaceuticals for $3.6 billion in cash. Pfizer will pay $14.25 a share for King, a 40 percent premium over Monday’s closing price.

Pfizer shares rose 10 cents, to $17.48, while King shares were up $3.99, to $14.14.

“I think the market is seeing a little bit of profit-taking,” said Nick Kalivas, vice president for financial research at MF Global. In London, the FTSE 100 was down 10.81 points, or 0.19 percent, while the DAX in Frankfurt fell 4.94 points, or 0.1 percent. The CAC 40 in France lost 19.63 points, or 0.52 percent.

Reports out of China indicated that the government was taking a new approach to control lending, telling its biggest banks to increase reserves.

And in South Korea, the steel maker Posco reported weaker quarterly profit and cut its outlook for the year, which analysts said affected shares of companies that did business in Asia.

Posco shares fell $5.03, to $114.47, in the United States.

The change in outlook raised “a little bit of a question about the demand for steel,” Mr. Kalivas said.

Energy, materials and transportation sectors were weaker in early trading on Tuesday, he said, adding: “Those are very sensitive to the Asian growth picture.”

Interest rates rose slightly. The Treasury’s benchmark 10-year note fell 11/32, to 101 22/32 and the yield rose to 2.43 percent, from 2.39 percent late Friday. The bond market was closed on Monday.

A version of this article appears in print on Oct. 13, 2010, Section B, Page 10 of the New York edition with the headline: Fed Report Lifts Shares But Brings No Surprise.