NEW YORK – U.S. blue-chip stocks rallied to a six-year-high Tuesday — driving the Dow Jones industrial average up to within about 100 points of its highest-ever close — as investors grew optimistic that the Federal Reserve soon will signal a pause in nearly two years of interest-rate hikes.
The Dow Jones industrial average finished up 55.23 points, or 0.48 percent, at 11,639.77 — its highest since January 2000, and its second-highest close ever. The Standard & Poor's 500 Index was up 0.48 of point, or 0.04 percent, at 1,325.14. The Nasdaq Composite Index was down 6.74 points, or 0.29 percent, to end at 2,338.25.
Shares of automaker General Motors Corp. (GM) jumped almost 10 percent after the company's chief executive said GM would seek an urgent resolution to labor issues with former subsidiary Delphi Corp. Stocks of mining-related companies also soared as gold prices topped $700 an ounce.
"The Dow looks like it is taking a leadership position right now and we're so close to the old highs and the old high closes, that you certainly think we're going to test and exceed the best-ever close," said Frank Lesh, a futures broker and analyst at FuturePath Trading LLC in Chicago.
The Fed's policy-making body, the Federal Open Market Committee, meets on Wednesday to consider the future direction of rates. Wall Street expects it will raise rates for the 16th straight time since June 2004.
After the closing bell, a stronger-than-expected profit report from Cisco Systems Inc. (CSCO) set the tone for a potential turnaround in tech stocks on Wednesday. Cisco shares climbed 4.2 percent in after-hours trade on the electronic brokerage network Inet to $22.67.
Cisco closed on Nasdaq at $21.68.
FED IN FOCUS
"The Fed will probably pause after raising rates tomorrow. Of course, there's still room for a surprise in either direction, but we think that's the best bet," said Ed Keon, chief investment strategist at Prudential Equity Group.
The U.S. central bank is expected to raise its benchmark fed funds rate by a quarter-percentage point to 5 percent Wednesday. But all eyes will be focused on its accompanying statement for clues about the future direction of rates and whether the Fed will pause in its nearly two-year cycle of rate increases, which began on June 30, 2004.
General Motors shares rose $2.25 to $25.80 after the company's Chief Executive said resolving labor issues with Delphi in order to avoid a disruption in its parts supply chain was an urgent priority. Deutsche Bank also raised its investment rating on the company's stock.
GOLD JUMPS, DELL FALLS
U.S. benchmark gold futures closed at a 25-year high of $701.50 an ounce, the highest price for the leading U.S. gold futures contract since September 1980. Investors bought gold, spurred by political tensions over iran's nuclear ambitions, worries about inflation and talk about China's gold reserves.
Shares of Freeport-McMoran Copper & Gold Inc. (FCX) rose 4.3 percent, or $2.86, to $69.47. The CBOE Gold Index , which includes Freeport-McMoran and other gold miners' stocks, jumped nearly 5 percent.
Shares of Caterpillar Inc. (CAT), which makes heavy machinery used by mining companies, added 1.6 percent, or $1.24, to close at a new all-time high of $81.14 on the NYSE.
Hitting the Nasdaq, Dell lost 4.7 percent, or $1.23, to $25.20 after the company warned late Monday that first-quarter earnings would fall below a previous forecast, as it reduced prices.
Shares of insurer UnitedHealth Group (UNH) fell 2.8 percent, or $1.28, to $43.80 after Banc of America Securities cut its price target on the stock, citing concern about a government inquiry into its procedures for awarding stock options.
Trading was moderate on the New York Stock Exchange, where about 1.52 billion shares were traded, below the 1.61 billion daily average for last year. On Nasdaq, about 1.92 billion shares changing hands, above last year's daily average of 1.80 billion.
Decliners slightly outnumbered advancers on the NYSE, with 1,679 stocks falling and 1,656 stocks rising. On Nasdaq, about seven stocks fell for every five that rose.