U.S. Stocks Close With New Records On Fed Minutes

NEW YORK (MarketWatch) -- U.S. stocks rallied, with the Dow Jones Industrial Average and the S&P 500 both closing at new highs, after the release of Federal Reserve commentary that reinforced thoughts of another interest-rate cut ahead.

"Most of what can be gleaned from the minutes to the Fed's Sept. 18 FOMC meeting appear to support the idea that the Federal Reserve remains poised to cut interest rates again," said Tony Crescenzi, fixed-income strategist at Miller Tabak & Co. LLC.

The Dow Jones Industrial Average ended 120.8 points ahead, at 14,164.5, a record close, after earlier hitting an all-time intraday high of 14,167.00.

Of the Dow's 30 components, 27 closed in positive turf.

The S&P 500 settled 12.57 points up to end at 1,565.15, a record close, after setting a new intra-day high of 1,565.15.

The Nasdaq Composite climbed 16.54 points to 2,803.91.

At their Sept. 18 meeting, there was no dissent to the central bank's decision to trim interest rates by half a percentage point, with Fed officials viewing the move as "the most prudent course of action," according to a summary. .

"Since Sept. 18, the housing data have deteriorated significantly and while some credit spreads have narrowed, overall credit conditions and standards have not loosened materially. The Fed could cut again on Oct. 31 based on these developments alone, and we judge the data will corroborate what's on the ground now," said Michael Gregory, senior economist, BMO Capital Markets.

Nearly 1.2 billion shares were traded on the New York Stock Exchange, with advancing stocks outpacing declining issues more than 2 to 1. On the Nasdaq, more than 1.9 billion shares exchanged hands, and advancing issues topped declining stocks 4 to 3.

Crude advance

Crude-oil futures ended higher amid concerns about heating-oil supplies ahead of seasonal demand, with crude for November delivery reversing overnight trading losses to end up $1.24, or 1.6%, at $80.26 a barrel on the New York Mercantile Exchange.

Gold reversed early losses to finish higher, while gold for December delivery gaining $4.60 to finish at $737.40 an ounce. .

The dollar initially jumped against its major counterparts Tuesday after the release of minutes from the U.S. Federal Reserve's last meeting, but quickly lost ground as investors realized the minutes didn't remove the chances of another interest rate cut.

The dollar index, which measures the greenback against a basket of major currencies, was at 78.450, after jumping to 78.630 after the minutes were released. .

Treasurys fell back slightly, sending yields higher, after the release of the Fed's commentary. The benchmark 10-year Treasury note fell 2/32 at 100 27/32, yielding 4.642%. .

In play

Internet search giant Google Inc. continued to gain after setting an all-time high on Monday. Google stock was up 0.8% at $614.70 after Lehman Brothers raised its price target on Google to $714 a share. .

Telecommunications stocks mostly retreated, with Sprint Nextel Corp. shares down 1.2% after word late Monday that the telecommunications giant's CEO had stepped down. .

Under fire amid subscriber defections and disappointing share-price performance, the Sprint executive's exit wasn't entirely unexpected.

Dow component Alcoa advanced 3.7% ahead of its post-close results, with the company expected to report a profit of 65 cents a share for the third quarter, according to the average estimate of analysts who follow the aluminum producer.

Already out with results, Mosaic Co. reported first-quarter profits of 69 cents a share, topping forecasts calling for 58 cents a share. Its stock rose 8%.

Shares of Yum Brands Inc. were up 5% after the fast-food restaurant giant reported a better than expected third-quarter profit after Monday's close.

American Electric Power Company Inc. advanced 1.4% afte the Columbus, Ohio-based utility agreed to pay more than $1 billion to settle a federal lawsuit tied to emissions from its coal-fired power plants. .

On the broker front, Deutsche Bank downgraded Dow component Coca-Cola Co. to hold from buy, citing valuation. Shares of Coca-Cola closed 0.1% up.

JetBlue Airways Corp. also drew a downgrade, with Goldman Sachs cutting its rating to neutral from buy. Shares of JetBlue slid 1.4%.

Gains overseas

In Asia, a handful of stock indexes in the region ended at record highs. .

In Europe, shares tallied broad-based gains, paced by London. See .

In trade thinned by the Columbus Day holiday, U.S. stocks on Monday ended mixed to mostly lower.

"This market could be headed for a short-term correction of 3% to 5% as earnings begin to flow," said Peter Cardillo, chief market economist at Avalon Partners. .

By Kate Gibson