S&P 500 Index Closes At Record High

Wall Street shot higher Wednesday, sending the Standard & Poor's 500 index to its first record close in more than seven years, as investors grew more confident that the Federal Reserve might cut interest rates in the second half of 2007. The Dow Jones industrials also reached a new high close.

The S&P 500, considered by traders as the best barometer of U.S. stocks, surpassed the record of 1,527.46, set March 24, 2000, at the peak of the dot-com boom, closing at 1,530.23, up 12.12, or 0.80 percent.

The index of 500 of the nation's biggest companies was powered by investors' relief over the minutes from the Fed's May 9 meeting of its Open Market Committee. The central bankers called inflation "uncomfortably high," a stance that made it less likely that the Fed would act to cut interest rates.

However, analysts said the Fed indicated in the minutes that the drag on the economy from the housing slump may be more severe than first thought — and that raised the possibility that the Fed hasn't ruled out lowering rates. The Fed has left rates unchanged at 5.25 percent for seven straight meetings.

"Wall Street took the minutes to mean that later on this year there will be more of a chance for a rate cut, and people rallied on that," said Ryan Larson, senior equity trader at Voyageur Asset Management. "It put a cut back on the table, and that's what led to these record index closes."

Many economists believe the Fed will keep rates unchanged for the rest of this year, although some say they're still looking for one or possibly two rate cuts at the end of 2007 if inflation pressures have moderated by then and the unemployment rate is rising.

The S&P 500, which crossed its closing record on May 21 and then retreated, remains below its all-time trading high of 1,552.87, also reached in March 2000.

The Dow, the first of the major market indexes to recover from Wall Street's prolonged slump in the early part of the decade, closed at 13,633.08, up 111.74, or 0.83 percent, and also reached a new trading high of 13,636.09.

The recovery of the S&P 500 comes as the index now has fewer technology stocks than in 2000. Financial services companies, which now make up the largest slice of the index, have helped drive the market's run since the second half of last year.

By comparison, the Nasdaq isn't expected to reach its closing high of 5,048.62, set March 24, 2000, anytime soon. The tech-dominated index — which closed up 20.53, or 0.80 percent, at 2,592.59 — was arguably overinflated by the rush to join the Internet boom.

The record close for the S&P and Dow came after the markets had opened sharply lower following a pullback in the often volatile Chinese stock markets. But, investors remained resilient and pushed stocks higher after determining China's problems were likely contained and found little reason for pessimism from the Fed's comments.

The S&P's advance is of greater significance to many investors than the 47 record closes the Dow has achieved since the beginning of October. There are more investments, like mutual funds, that track the S&P 500; these funds are an integral part of many retirement plans.

The Russell 2000 index of smaller companies also closed at an all-time high, up 5.82, or 0.69 percent, to 843.35. The large-cap Russell 1000 and the broader Russell 3000 also hit record closes.

Advancing issues outnumbered decliners by about 2-to-1 on the New York Stock Exchange, where consolidated volume came to 2.87 billion shares, compared with 2.56 billion on Tuesday.

Bonds erased most of the gains posted earlier in the session after the release of the FOMC meeting minutes. The yield on the benchmark 10-year Treasury was unchanged at 4.88 percent. Fixed-income investors had previously driven down bond yields in anticipation of a possible cut.

The dollar was mixed against other major currencies, while gold prices fell. Crude oil rose 34 cents to $63.49 per barrel on the New York Mercantile Exchange.

Stocks spent most of the morning session in negative territory after the plunge in China's markets stunted U.S. investors. But, Wall Street's rebound showed investor confidence that the latest drop in China's markets would not trigger a global sell off as it did in February.

Beijing tripled a tax on stock trading to cool the country's market boom, causing the main Shanghai Composite Index to drop 6.5 percent and the Shenzhen Composite Index for China's smaller second market to slide 7.2 percent.

Chinese stocks fell again Thursday, with the Shanghai Composite Index opening down 1.15 percent and the Shenzhen Composite Index down 3 percent.

Japan's Nikkei stock average fell 0.48 percent Wednesday; Britain's FTSE 100 fell 0.41 percent; Germany's DAX index dropped 0.61 percent, and France's CAC-40 declined 0.52 percent.

Investors had been jittery since comments last week from former Federal Reserve Chairman Alan Greenspan, who said the Chinese markets could experience a significant pullback.

In corporate news, Pulte Homes Inc. said late Tuesday it will slash about 16 percent of its work force, or about 1,900 jobs, to save the homebuilder an estimated $200 million a year before taxes. Shares of the company fell 2 cents to $27.43.

Bookseller Borders Group Inc. fell $1.10, or 4.7 percent, to $22.22 after it reported late Tuesday a wider loss in the first quarter than in the year-ago period, citing a difficult sales climate.