(Updates to early afternoon)
By Ellis Mnyandu
NEW YORK, Jan 28 (Reuters) - U.S. stocks rose on Monday on
hopes the Federal Reserve would keep slashing interest rates to
prevent the housing slump from tipping the economy into a
recession.
Trading was volatile, with the stock market initially
struggling to advance after the market opened.
But with Fed policy-makers due to decide on interest rates
on Wednesday, investors pushed stocks higher after Friday's
slide, counting on lowered borrowing costs for businesses and
consumers to stimulate economic activity. Fed Chairman Ben
Bernanke and top officials are scheduled to meet Tuesday and
Wednesday to decide rate policy.
Shares of General Electric Co <GE.N>, seen as a proxy for
the economy because of its diversified businesses, rose as did
interest-rate sensitive companies, such as credit card provider
American Express Co <AXP.N>.
GE was up 1.3 percent to $34.45 while American Express
gained 2 percent to $46.41.
Responding to a global stock market rout early last week,
the U.S. central bank chopped rates by three-quarters of a
percentage point, bringing the federal funds rate down to 3.5
percent.
"There's hope that Ben Bernanke will do more on Wednesday,"
said Alan Lancz, president of Alan B. Lancz & Associates Inc.,
an investment advisory firm in Toledo, Ohio. "Last week's 75
basis-points cut was a nice turnaround, and some kind of
follow-through will be good too."
The Dow Jones industrial average <> was up 96.33
points, or 0.79 percent, at 12,303.50. The Standard & Poor's
500 Index <.SPX> was up 13.26 points, or 1.00 percent, at
1,343.87. The Nasdaq Composite Index <> was up 13.79
points, or 0.59 percent, at 2,339.99.
Earnings news was mixed. Fast-food restaurant McDonald's
Corp <MCD.N> fell 7 percent to $50.29 after posting flat sales
in December, but specialty glass maker Corning Inc <GLW.N> rose
3 percent to $23.16 after reporting higher profit, boosted by
strength in its display business.
Government data showing a bigger-than-expected drop in
new-home sales last month strengthened the argument for Fed
rate cut, analysts said. Lower rates could ease the strain on
mortgage borrowers.
Shares of insurer American International Group Inc <AIG.N>
climbed 2.7 percent to $54.67, while Bank of America Corp
<BAC.N>, the No. 1 U.S. bank by market value, jumped 2.7
percent to $40.55 on the NYSE.
On the Nasdaq, shares of Apple Inc <AAPL.O> led advancers
with a gain of nearly 1 percent to $131.20. Last week the maker
of the iPhone and the iPod had rattled investors with a
quarterly profit outlook below Wall Street's estimates, sending
its stock into a tailspin.
According to Reuters data, the S&P 500 index starts the
week at its most oversold condition since October 2002, as
measured by the relative strength index.
U.S. short-term interest rate futures <FFG8> showed
perceived chances that the Fed would approve a half-percentage
point rate cut on Wednesday rose to 90 percent.
Investors are hoping rate cuts, together with a fiscal
economic stimulus package worth at least $150 billion, will
help revive growth and avoid a recession.
(Editing by Kenneth Barry)
