Stocks Rise But Bonds Fall Slightly --- Second Thoughts About the Fed Help The Dollar Recover
Stock investors marched ahead where bond investors feared to tread.</br></br>The Dow Jones Industrial Average climbed 7.51 points to 2386.91, another post-crash high, in moderate trading. But higher oil prices and the growing suspicion that the Federal Reserve won't relax its grip on interest rates anytime soon caused long-term bonds to drop slightly. The dollar strengthened as currency traders also had second thoughts about Fed policy.</br></br>As expected, the stock market opened on a down note as investors took profits following the nearly 42-point gain in the Dow Jones Industrial Average Tuesday. That gain was prompted by a lower-than-expected rise in the March consumer-price index and a sharp drop in housing starts in March. Investors interpreted those figures to mean that the economy is slowing and inflation pressures are fading. But prices quickly recovered and remained higher throughout the day.</br></br>A.C. Moore, director of research at Argus Research, warned that stock investors appear to be buying the argument -- which he rejects -- that a slower economy will be good for stocks because inflationary pressures will ease. He said a long list of economic indicators in recent weeks indicates that the economy is heading toward a recession that will undermine corporate earnings.</br></br>"We just don't think stocks have tremendous upside potential," he said. "It may be somewhat hazardous to respond favorably to those kinds of numbers."