Stocks rise to 2009 highs, Dow adds 51 as commodities rebound, Fed begins rates meeting

Rebound in commodities carries stocks to 2009 high

NEW YORK — A rebound in commodities drew investors back into the stock market and helped push stocks to new highs for 2009.

Major stock indicators rebounded Tuesday from a drop the day earlier to end at their highest levels in 11 months. The Dow Jones industrials rose 51 points after falling 41 on Monday.

After soaring 50.1 percent since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark — a level the average first crossed in March 1999 and hasn’t been above since October.

In an about-face, the dollar weakened against other major currencies. That helped lift commodities like oil and gold as well as energy and material stocks. Financial stocks also rose sharply.

The gains came as the Federal Reserve began a two-day meeting on interest rates. Investors are hoping the central bank will provide a clearer indication of when it might raise rates. Analysts also expect the statement the Fed issues at the conclusion of its meeting Wednesday will indicate the economy is improving. Fed Chairman Ben Bernanke said last week that the U.S. recession was “likely over” from a technical standpoint even though troubles like high unemployment remain.

The Fed is widely expected to keep rates at their record low of near zero for the time being. Rock-bottom interest rates have helped fuel the market’s nearly seven-month old rally, making cash plentiful and cheap and encouraging investors to buy up riskier assets.

The market appears to be following a well-established pattern where brief dips are met with more buying as investors fear missing a continued rally.

“Reluctantly, investors are continually being dragged into a market that is finding a path of least resistance to the upside,” said Art Hogan, chief market analyst at Jefferies & Co.

The consensus on Wall Street is that the economy is healing despite challenges like unemployment. But investors still have doubts over how strong the recovery will be, and whether the stock market’s surge off of 12-year lows in March accurately reflects the still-fragile state of the economy.

“Right now, it’s a more orderly market,” said Greg Reynholds, senior vice president of asset management at Lenox Advisors. “People are digesting the data, trying to figure out exactly where we’re headed.”

The Dow Jones industrial average rose 51.01, or 0.5 percent, to 9,829.87, its highest close since Oct. 6, when it finished at 9,956.

The broader Standard & Poor’s 500 index gained 7.00, or 0.7 percent, to 1,071.66, while the Nasdaq composite index rose 8.26, or 0.4 percent, to 2,146.30. Both indexes are at 11-month highs.

More than two stocks rose every one that fell on the New York Stock Exchange, where consolidated volume came to 5.3 billion shares compared with 4.7 billion Monday.

Gold and silver prices rose after three days of drops, while oil prices gained $1.84 to settle at $71.55 a barrel on the New York Mercantile Exchange.

Commodities rose as the U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell 0.8 percent, after earlier hitting a fresh low for the year. The dollar has fallen sharply since early March, making commodities cheaper for foreign investors, as its appeal wanes amid low interest rates and unprecedented government spending designed to stimulate the economy.

Demand for energy and material stocks increased as commodities rose. U.S. Steel Corp. added $2.22, or 4.6 percent, to $50.24, while Chesapeake Energy Corp. jumped $1, or 3.6 percent, to $29.11.

Financial stocks rose after Rochdale Securities analyst Richard Bove raised his target price on Bank of America Corp. to $25 a share. Shares of the Charlotte, N.C.-based bank rose 36 cents, or 2.1 percent, to $17.61.

Among technology stocks, Google Inc. shares hit a 13-month high after a Canaccord Adams analyst raised the target price on the stock to $560. Shares rose as high as $501.99 and ended at $499.06, a gain of $2.06.

Bond prices rose, pushing yields down. The yield on the benchmark 10-year Treasury note fell to 3.45 percent from 3.49 percent late Monday.

In other trading, the Russell 2000 index of smaller companies rose 4.72, or 0.8 percent, to 620.69.

Overseas, Britain’s FTSE 100 rose 0.2 percent, Germany’s DAX index jumped 0.7 percent, and France’s CAC-40 rose 0.3 percent. Japan’s markets were closed for a public holiday.