Investors Run to Dollar On Trade Deficit News
Investors rushed to buy dollars following news that the trade deficit shrank more than expected.</br></br>The irrepressible dollar and optimism about an inflation report today also helped bolster prices of stocks and long-term bonds. The Dow Jones Industrial Average climbed 8.98 points in brisk trading to 2462.43, just below its post-crash high of 2463.89, set Monday.</br></br>The trade report for March "boosted confidence in the dollar, which also lent a positive tone to stocks because strong export growth means good corporate earnings," said George R. Mateyo, president and chief executive officer of Carnegie Capital Management Co. in Cleveland, which manages about $2 billion.</br></br>But strong export growth also reduces the chances that the Federal Reserve will ease interest rates any time soon, Mr. Mateyo and several other money managers said. If the economy continues expanding moderately, the Fed probably will leave credit policy unchanged. Numerous analysts think the Fed may even raise rates to combat inflation. Most short-term interest rates rose yesterday.</br></br>The trade report indicates that "maybe the overall economy isn't quite as weak as people thought," says Nick Sargen, an analyst at Salomon Brothers Inc. "That makes it even less likely" the Fed will ease rates.