The stock market shook off early uncertainty to close moderately higher Thursday as a series of mixed economic reports managed to make investors more optimistic about the chances for an interest rate cut by the Federal Reserve.
The market was uneasy after the Mortgage Bankers Assn. said that 0.65% of home loans outstanding entered the foreclosure process in the second quarter. It was the third consecutive quarter that the figure reached an all-time high.
Although investors want growth to be slow enough to merit a rate cut when the Federal Reserve meets Sept. 18, the mortgage report was too downbeat for some investors. But the market saw some reason for optimism from comments by Dallas Federal Reserve President Richard Fisher, who called inflationary pressures "increasingly well behaved," and said the central bank was "listening carefully" to business conditions. St. Louis Fed President William Poole made similar comments.
"They didn't explicitly say they were going to cut rates, but some of the talk from the day gave reason to believe they may be leaning that way," said Todd Salamone, director of trading at Schaeffer's Investment Research. "The market is driven by words from the Fed that reinforces the idea they'll step up if necessary, and it is also very much data driven."
The Dow Jones industrial average closed up 57.88 points, or 0.4%, at 13,363.35 after wobbling in and out of positive territory.
The Standard & Poor's 500 index climbed 6.26 points, or 0.4%, to 1,478.55, and the Nasdaq composite index rose 8.37 points, or 0.3%, to 2,614.32.
The Russell 2,000 index of smaller companies rose 2.46 points, or 0.3%, to 792.92.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
Treasury bond yields rose as stocks recovered ground. The yield on the benchmark 10-year T-note climbed to 4.51% from 4.46% late Wednesday. The dollar was lower against most other major currencies. Gold prices jumped, with the actively traded December contract topping $700 an ounce.
The credit markets, whose problems have caused the volatility on Wall Street over the last month, remain tight. The Fed injected a total of $31.25 billion into the financial system Thursday -- the Fed's largest such move in weeks -- to help keep money markets liquid.
The Fed also reported that the volume of outstanding commercial paper, a type of bond that companies sell to finance daily operations, shrank by about 3% in the week ended Wednesday.
