NEW YORK Investors are getting optimistic that the Federal Reserve will restart some of its economic stimulus programs.
Stocks closed moderately higher Monday, a sign that many investors expect the Fed to take steps to put some energy back into the recovery. The Dow Jones industrial average rose 45 points.
Trading was very light as many investors stayed out of the market while they waited for the Feds decision. Many traders have been avoiding any big investment decisions for much of the summer because they have no sense of where the economy is headed.
The Feds assessment of the economy, and any plans to resume its stimulus measures, will be issued after its meeting today.
The market loves stimulus. The market wants stimulus, said Joe Saluzzi, co-head of equity trading at Themis Trading LLC in Chatham, N.J.
The Fed likely will leave its federal funds rate near zero, but the central bank could signal plans to restart some programs such as its purchase of mortgage-backed securities or buy Treasury bonds. The central banks programs ended earlier this year when it appeared the recovery was proceeding well.
The Fed has a lot of tools in its tool shed, said Larry Rosenthal, president of Financial Planning Services in Manassas, Va. They have to bring buyers back into the market; they have to bring consumption back into the market.
Still, Rosenthal said any moves also would have to ensure that inflation doesnt become a problem too quickly. The Fed could say Tuesday that it is ready to start new programs to encourage bank lending even if it doesnt implement them immediately.
Hewlett-Packard Co. shares managed a small gain after its CEO was forced to resign Friday.
The Dow rose 45.19, or 0.4 percent, to 10,698.75. The Standard & Poors 500 index rose 6.15, or 0.6 percent, to 1,127.79, and the Nasdaq composite index rose 17.22, or 0.8 percent, to 2,305.69.
Advancing stocks were ahead of losers by almost 3 to 1 on the New York Stock Exchange, where volume came to 789 million shares.
Bond prices traded in a narrow range Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.83 percent from 2.82 percent late Friday.
Hank Smith, chief investment officer at Haverford Investments in Radnor, Pa., said the Fed has to be careful with how it phrases its assessment of the economy and any plans to restart stimulus programs.
While investors know that the economy is weaker than it was earlier this year, bad news from the Fed could lead to further problems, starting with a drop in the stock market.
It might be a self-fulfilling prophecy, Smith said.