At last, fundamentals outweigh Fed speak

U.S. stocks rose after better-than- forecast data on leading indicators and regional manufacturing fueled optimism in the economy, overshadowing comments that interest rates may rise in the middle of next year.

Microsoft Corp. gained 2.4 percent after Morgan Stanley said the company’s anticipated Office software for Apple Inc.’s iPad could deliver $1.2 billion a year in billings. AT&T Inc. jumped 3.3 percent to lead a rally in phone stocks. Guess? Inc. slipped 4.9 percent after its full-year earnings projection trailed analysts’ predictions.

The S&P 500 gained 0.5 percent to 1,870.73 at 12:29 p.m. in New York. The Dow Jones Industrial Average added 113.12 points, or 0.7 percent, to 16,335.29. Trading in S&P 500 stocks was 2.5 percent above the 30-day average at this time of day.

“The market has digested and even discounted a bit what Yellen said, and put things into perspective,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group LP, said in a phone interview. “We have to see how the economy continues to move along. People are back focusing on signs of economic growth.”

The equities benchmark fell 0.6 percent yesterday after Federal Reserve Chair Janet Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise about six months later. The Fed had previously said it would not raise rates for a considerable period, without specifying a time frame.

Fed Stimulus

Quarterly Fed forecasts also showed more officials predicting that the benchmark rate, now close to zero, will rise to at least 1 percent at the end of 2015 and 2.25 percent a year later. The central bank said it would trim its monthly bond purchases by $10 billion to $55 billion.

Three rounds of Fed stimulus and low interest rates have helped boost the equity gauge as much as 178 percent from a 12- year low as U.S. stocks enter the sixth year of a bull market.

Yellen also said harsh winter weather was a significant reason for weakness this year in economic data from housing to jobs.

Data today showed the world’s largest economy will strengthen after the weather-induced slowdown in the first quarter, as the index of leading indicators rose more than forecast in February.

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