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US STOCKS-Markets rise on weak dollar, Fed stimulus talk

Published 10/25/2010, 01:32 PM
Updated 10/25/2010, 02:21 PM
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* Dollar pressure boosts equities after G20 meeting

* Commodities also benefit from greenback weakness

* September existing-home sales rise more than expected

* Dow up 0.4 pct, S&P up 0.4 pct, Nasdaq up 0.6 pct (Updates to afternoon)

By Ryan Vlastelica

NEW YORK, Oct 25 (Reuters) - U.S. stocks rose on Monday as a weak dollar and expectations of economic stimulus from the Federal Reserve prompted investors to buy riskier assets.

The slide in the greenback continued after a weekend meeting of the Group of 20 stopped short of setting targets to reduce trade imbalances. Expectations the Fed will print money to buy assets to stimulate growth have weakened the dollar, which in turn has lifted commodity prices.

Freeport-McMoRan Copper and Gold Inc advanced 2.1 percent to $96.06 while oil refiner Holly Corp gained 3.2 percent to $33.29. The S&P materials sector gained 2 percent.

Equities and the dollar have developed a strong inverse relationship, so that as the dollar comes under pressure, equities are boosted. Since the start of September, the S&P has risen about 13 percent.

"Without much fundamental news, markets are just following the dollar and the Fed's comments," said James Meyer, chief investment officer at Tower Bridge Advisers in West Conshohocken, Pennsylvania.

Meyer added that the lack of fundamental news could prompt late-day profit-taking but "overall the tone remains quite positive."

The Dow Jones industrial average was up 49.08 points, or 0.44 percent, at 11,181.64. The Standard & Poor's 500 Index was up 4.81 points, or 0.41 percent, at 1,187.89. The Nasdaq Composite Index was up 14.12 points, or 0.57 percent, at 2,493.51.

In a research report, Goldman Sachs said the Federal Open Market Committee is almost certain to announce renewed monetary easing at its Nov. 2-3 meeting.

Goldman analysts calculated the Fed may have to buy up to $4 trillion in assets to achieve desired growth and inflation targets. They forecast the Fed's second round of quantitative easing will likely be worth $2 trillion.

Existing-home sales rose more than expected in September, the National Association of Realtors said, lifting the Dow Jones U.S. Home Construction index 1.4 percent. D.R. Horton Inc advanced 2.5 percent to $10.87.

Both Office Depot Inc and tobacco company Lorillard Inc rallied after posting stronger-than-expected profits. Office Depot also said that its embattled chief executive would be stepping down, sending the stock up 6.3 percent to $4.92. Lorillard rose 2.1 percent to $85.85.

On the downside, RadioShack Corp tumbled 8.1 percent to $20.98 on concerns about its stagnant core electronics business.

Citigroup Inc rose 1.5 percent to $4.17 after Goldman Sachs added the stock to its "conviction buy list," saying the big bank faced limited mortgage loan repurchase risk compared with its peers.. (Editing by Kenneth Barry)

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