NEW YORK — Investors are in a game of wait-and-see with the Federal Reserve. Today, they guessed that the Fed will continue trying to prop up the economy, and sent stocks higher.
The Dow Jones industrial average rose 153 points, or just over 1 percent, to 15,224, in midday trading. Twenty-six of the Dow’s 30 stocks were up, and the other major indexes also rose.
With few big company announcements or economic reports, investors were homing in on predictions for what Fed policymakers will do during a scheduled two-day meeting starting Tuesday. They’ll keep guessing until Wednesday, when Fed Chairman Ben Bernanke holds a news conference.
The market was rising today because investors think Fed leaders will determine that the economy isn’t recovering fast enough. That might not sound like good news, but it would influence the Fed to continue the programs it has implemented to stimulate the economy: keeping interest rates low to encourage borrowing and buying bonds to push investors into stocks.
Not everyone thinks the market’s rise is rational. It doesn’t make sense, they say, for stocks to consider bad news as good, and to be yanked back and forth more by the actions of a central bank than the underlying fundamentals of the economy.
“I think the market’s a little hooked on a drug here,” said Doug Lockwood, branch president of Hefty Wealth Partners in Auburn, Ind. “You take drugs, you feel better, but it’s short lived. Printing of money should never be considered a great thing for the economy.”
Bernanke said May 22 that the Fed would consider pulling back on its bond-buying program if measures of the economy, especially hiring, improve. That sent the market into flux: In the 16 trading days since then, the Dow has swung by triple digits 10 times. Overall, the Dow is down about 1 percent since before Bernanke’s testimony.
One question Bernanke is likely to be asked Wednesday: What’s a sign that the economy has improved enough for the Fed can pull back on its stimulus?
Two points of economic data released today were positive, though both are considered less-important gauges of the U.S. economy. A measure of New York state factory activity showed a pickup, and a survey of U.S. homebuilders said they were more optimistic about home sales than they have been in seven years.
In other U.S. stock trading, the Standard & Poor’s 500 index was up 20 points, or 1.2 percent, to 1,646. The Nasdaq composite was up 45, or 1.3 percent, to 3,468.
Stocks in France, Germany, Italy, Spain and the U.K. rose. Greece was an exception. Stocks were down in the debt-ridden country, where bickering is still reverberating over the prime minister’s decision last week to shut down the state TV and radio broadcaster to try to save money.
The price of crude oil rose 32 cents to $98.17 a barrel in New York. Gold edged down $4 to $1,383 an ounce.
Among U.S. stocks making big moves:
—Pinnacle Entertainment jumped more than 4 percent after it moved closer to regulatory approval for its purchase of Ameristar Casinos. Pinnacle was up 79 cents to $19.64.
— Ameristar Casinos didn’t enjoy quite the same boost: It was up 20 cents, less than 1 percent, to $26.40.
—SodaStream, which makes machines that let people make soda at home, fell $1, or 1.3 percent, to $71.83 after announcing that it would work with KitchenAid to sell an at-home carbonation system.
— Whirlpool, which makes KitchenAid products, rose $1.59, or 1.2 percent, to $130.83.
—Johnson & Johnson rose 84 cents, or 1 percent, to $85.75, after saying it would buy Aragon Pharmaceuticals, a private company focused on drugs for hormonally-driven cancers.
—Boeing was up after Qatar Airways and the aircraft leasing arm of General Electric both put in an orders for aircraft. Boeing rose $1.34, or 1.3 percent, to $103.19.