Stocks soar on hopes for a rate cut

NEW YORK - Stocks rose sharply yesterday as investors grew more confident that the Federal Reserve would lower interest rates next week, even after its chairman gave no clues about the central bank's intentions. The Dow Jones industrial average rose 180 points.

Traders had been hoping Fed Chairman Ben S. Bernanke would give some indication during a speech to Germany's Bundesbank about the Fed's next move. Wall Street is looking for a rate cut to help bolster the U.S. economy and ease problems caused by tightening credit availability.

"Bernanke didn't really say anything about interest rates, but at this point the feeling on Wall Street is that it's mandatory," Steven Goldman, chief market strategist for Weeden & Co. L.P., said of a rate cut.

The Dow rose 180.54, or 1.38 percent, to 13,308.39. The Standard & Poor's 500 index rose 19.79, or 1.36 percent, to 1,471.49, while the Nasdaq composite index rose 38.36, or 1.50 percent, to 2,597.47.

Bonds fell as investors withdrew money to buy stocks, pushing the 10-year Treasury note's yield to 4.36 percent from 4.27 percent late Monday. The dollar weakened against the euro and the British pound, while gold moved higher.

Tim Krause, director of risk management at California-based Zecco Trading, agreed that yesterday's rally was caused by optimism among institutional investors over a rate cut. However, he was not entirely certain that the Fed would cut rates, given that such a move would affect the already weakened dollar - which is now near a record low vs. the euro.

"The Fed is between a rock and a hard place," Krause said. "If they lower interest rates, the dollar will keep getting crushed. If they don't, the subprime mess will get worse and hurt the housing market."

Though much attention was on the central bank, corporate news also influenced stocks.

The Nasdaq got a boost from ImClone Systems Inc., which along with Bristol-Myers Squibb Co. said the drug Erbitux had improved the survival rate of lung-cancer patients in a late-stage study. ImClone soared $6.97, or 18.4 percent, to $44.90. Bristol-Myers rose 23 cents, to $28.23.

The Dow, meanwhile, benefited from strong gains in McDonald's Corp. stock. Shares of McDonald's, one of the 30 companies that make up the Dow, rose $1.61, or 3.2 percent, to $51.76 after the fast-food chain reported that global sales at restaurants open at least a year had risen 8.1 percent in August.

Boeing Co. also helped the blue chips advance after it was awarded a $1.1 billion U.S. Air Force contract. Shares picked up $2.11, or 2.2 percent, to $97.44.

General Motors Corp. rose $1.33, or 4.6 percent, to $30.54 as investors got a glimpse of new models at the Frankfurt Auto Show.

Crude oil rose 74 cents to close at $78.23 after OPEC agreed to boost its crude output 500,000 barrels a day.

The Russell 2000 index of smaller companies was up 12.46, or 1.62 percent, at 782.27.

Japan's Nikkei stock average added 0.7 percent. Britain's FTSE 100 rose 2.39 percent, Germany's DAX index rose 1.12 percent, and France's CAC-40 rose 1.72 percent.