Stocks climb after Fed pledges to hold rates low

NEW YORK -- The stock market continued its slow but steady advance of the past month as investors grew more confident that interest rates will remain at low levels.

The Dow Jones industrial average rose 48 points in its seventh straight advance and closed at a new high for 2010. The gain means the Dow has joined the Standard & Poor's 500 index and Nasdaq composite index in reaching the best levels since 2008.

The catalyst for this latest gain was the Fed's decision Tuesday to hold its key lending rate at a record low of essentially zero. A government report that prices at the wholesale level fell by the biggest amount in seven months boosted investors' belief that inflation is in fact being contained. That allows the Fed to keep rates low.

The Labor Department's Producer Price Index fell 0.6 percent in February, its steepest drop in seven months. Economists polled by Thomson Reuters forecast a drop of 0.2 percent. A drop in energy prices helped push the index lower.

It's clear from the market's trek higher that investors are feeling more upbeat. Since Feb. 8, the Dow is up 7.9 percent. That's a big gain that might ordinarily take a year to accomplish. But the Dow had slumped 7.6 percent in the month before that, so a rebound isn't surprising.

Analysts are focusing not on the size of the gain but the way the market is climbing: in almost a stairstep pattern. The Dow hasn't swung by more than 100 points in 11 of the past 13 trading days.

The more modest advances signal that investors aren't getting overconfident.

"This market is behaving just the way you like to see," said James Meyer, chief investment officer at Tower Bridge Advisors in Conshohocken, Pa.

Meyer said investors are cautious but relieved as big problems like unemployment and housing appear to be getting better, even if the improvement is slow. Most reports signal that the economy is recovering. The occasional bursts of good news have helped overshadow some of the more downbeat economic numbers.

According to preliminary calculations, the Dow rose 47.69, or 0.5 percent, to 10,733.67. The Dow topped its earlier high for 2010 of 10,725.43 from Jan. 19. It is at its highest point since Oct. 1, 2008.

The S&P 500 index rose 6.75, or 0.6 percent, to 1,166.21. That's the highest close since Sept. 30, 2008.

The Nasdaq rose 11.08, or 0.5 percent, to 2,389.09, its best level since Aug. 28, 2008.