U.S. Stocks Gain Ahead Of Fed Decision

NEW YORK (MarketWatch) -- Wall Street climbed higher Wednesday, with investors cheered by thoughts the day could bring another interest-rate reduction by the Federal Reserve.

With a decision due at 2:15 p.m. Eastern, consensus estimates say the central bank will cap a two-day Federal Open Market Committee gathering by trimming rates a quarter-point to 4.5%, following up on a 50-point cut in September.

"Today all eyes are on the FOMC. We expect [a] 25 basis point cut with further action likely as the economy slips through quarter two of 2008," said Tom Di Galoma, head of U.S. Treasury trading at Jefferies & Co. Inc.

The Dow Jones Industrial Average gained 41.3 points to 13,833.8.

Of the Dow's 30 components, 21 were trading higher, led by financials including American Express Co. , and JP Morgan Chase , both up 1.5%.

Another blue chip, Verizon Communications rose 1.2% in the wake of reports that the wireless carrier is in talks with Google Inc. about teaming up on a product to compete with Apple Inc.'s iPhone.

The Dow's declining issues included Wal-Mart Stores Inc. , down 0.02% after the world's largest retailer said it would start its holiday discounting early. .

The S&P Composite rose 7.21 points to 1,538.23, while the Nasdaq Composite climbed 10.67 points to 2,827.38.

Volume on the New York Stock Exchange came to 210 million, and advancing stocks ahead of those declining 9 to 5. On the Nasdaq, nearly 387 million stocks exchanged hands, with advancers edging ahead of declining stocks roughly 7 to 6.

Economic front

Pre-opening data including a Commerce Department indicating the U.S. economy shook off the worst housing slump in a generation to grow at a 3.9% annual pace in the third quarter.

In employment-related data, the Labor Department said compensation costs climbed 0.8% in the third quarter, less than the forecasted 0.9% gain. .

Private payrolls grew by 106,000 in October after a revised 61,000 gain in September, ADP reported, with the count suggesting nonfarm payrolls expanded more than analysts expected.

In play

Shares of insurer the Commerce Group jumped after it said it would be acquired by Spain's MAPFRE S.A. for $2.21 billion, or $36.70 a share.

In recent trade, Commerce Group shares were up 16.5% at $36.25.

On the earnings front, Kraft Foods Inc. reported a 20% decline in profits.

MasterCard Inc. pointed to higher consumer spending as helping fuel a 63% jump in third-quarter net income.

Clorox Co. reporting a 1% decline in quarterly profit, citing higher commodity costs as among the factors hitting its bottom line.

Forest-products producer Weyerhaeuser Co. reported third-quarter earnings fell 55% amid the ongoing slump in the housing sector.

In early commodities trade on the New York Mercantile Exchange, crude-oil futures added 89 cents to $91.27. .

Gold futures advanced $1.50 to $789.30.

Treasury prices fell, sending yields higher, with the benchmark 10-year note slipping 7/32 to 102 22/32, its yield up to 4.410%. .

The Nikkei 225 closed with a 0.5% gain as the Bank of Japan held rates at 0.5%.

European shares headed higher, with financials in the lead as investors prepare for an expected rate cut from the U.S. Federal Reserve and after Deutsche Bank posted solid third-quarter earnings. .

By Kate Gibson