NEW YORK -- Wall Street put aside its worries over interest rates Monday and managed a halfhearted rally on the eve of a key Federal Reserve meeting.
While a rate hike was not expected at Tuesday's meeting, the Fed's statement after the gathering was expected to be thoroughly dissected by Wall Street. As the economy continues to grow at a rapid pace, most investors expect a hike by August to combat inflation.
"The Fed is going to telegraph its intentions for the market in its statement tomorrow," said Keith Keenan, vice president of institutional trading at Wall Street Access. "I can't imagine they'd shock the market with a hike tomorrow, but rather they'll get everyone ready for something in June or August. Overall, I think there's the potential for a somewhat positive response on the market tomorrow, depending on what they say."
Nonetheless, with trading volume light and prices falling from their session highs through the afternoon, the bounce from last week's selling was unlikely to be a signal of an overall turnaround, especially with the markets sensitive to any change in the Fed's stance.
According to preliminary calculations, the Dow Jones industrial average rose 88.43, or 0.9 percent, to 10,314.00 after falling 2.4 percent the previous week.
Broader stock indicators were also higher. The Standard & Poor's 500 index gained 10.26, or 0.9 percent, to 1,117.56 after last week's 2.9 percent drop. The Nasdaq composite index was up 18.57, or 1 percent, at 1,938.72 on the heels of a 6.4 percent skid the week before.
The Commerce Department reported that construction spending jumped by 1.5 percent in March from February to a seasonally adjusted annual rate of $944.1 billion, the highest level on record. The increase was three times higher than economists expected. However, manufacturing growth slowed slightly in April due to higher costs for materials, according to the Institute for Supply Management's manufacturing index.
"I don't think this was so much about the economic data, I think the market was just oversold coming into today," said Russ Koesterich, U.S. equity strategist at State Street Corp. "The economic data was good, but not great. With the low volume, this rally is not really convincing."
Interest rate concerns kept the market down most of April, causing many investors to ignore very strong corporate earnings, analysts said.
"I think we're seeing good economic numbers, and we're catching up with some of the earnings numbers that we've ignored so far," said Brian Belski, market strategist at Piper Jaffray. "Institutional investors have been so reactive on rates and economic news, but we're telling our clients to take a look at the fundamentals, and the fundamentals are sound."
Warren Buffett, chairman of Berkshire Hathaway Inc., told investors over the weekend the holding company has already shifted its assets in anticipation of rising rates. After its annual meeting this weekend, "A" shares of Berkshire Hathaway fell $590.00 to $92,800.00 per share.
Signs of life in the technology sector helped semiconductor stocks. Global semiconductor sales rose 32.3 percent year-over-year, according to an industry report. Chip maker Intel Corp. gained 31 cents to $26.04 and Advanced Micro Devices Inc. climbed 5 cents to $14.27, while chip equipment maker Applied Materials was down 15 cents at $18.12.
Sara Lee Corp. announced it has hired former PepsiCo Inc. executive Brenda Barnes as president and chief operating officer. The food producer and apparel maker climbed 29 cents to $23.37.
In earnings news, InterActiveCorp, which runs Ticketmaster and the Home Shopping Network, was down $1.19 at $31.06 after it swung to a profit in the first quarter based on strong growth in its core businesses.
Adobe Systems adjusted its second quarter outlook, saying increased sales of its document reader and management software would help the company exceed previous estimates. Adobe jumped $2.50 to $44.00.
Advancing issues outnumbered decliners by nearly 3 to 2 on the New York Stock Exchange, where volume came to 1.56 billion shares, compared with 1.63 billion on Friday.
The Russell 2000 index of smaller companies rose 5.67, or 1 percent, to 565.47.
Overseas, markets in Britain and Japan were closed for holidays. Germany's DAX index climbed 0.6, and France's CAC-40 was up 0.9 percent for the session.
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