Stocks rise on a bit of hope before Fed meets

Updated: August 9, 2010 - 8:12 PM

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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 traders expect the Fed to take steps to put some energy back into the recovery. The Dow Jones industrial average rose 45 points, more than making back its loss from Friday.

Volume on the New York Stock Exchange fell to its lowest level of the year as many investors stayed out of the market while they waited for the Fed's decision.

The Fed's assessment of the economy, and any plans to resume its stimulus measures, will be issued after its meeting ends Tuesday.

"The market loves stimulus. The market wants stimulus," said Joe Saluzzi, co-head of equity trading at Themis Trading in Chatham, N.J.

The Fed will likely 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 bank's 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."

The Dow rose 45.19, or 0.4 percent, to 10,698.75. On Friday, the Dow fell 21 after investors were disappointed by the government's weak July jobs report.

The Standard & Poor's 500 index rose 6.15, or 0.6 percent, to 1,127.79. The Nasdaq composite rose 17.22, or 0.8 percent, to 2,305.69.

ASSOCIATED PRESS