Stocks & Bonds: Shares Rise On Anticipation Of A Rate Cut

Wall Street advanced yesterday as expectations for an interest rate cut from the Federal Reserve and an uptick in pending home sales helped offset concerns about another round of losses related to subprime mortgages.

Investors remained upbeat ahead of the Fed’s rate-setting meeting today. Policy makers are broadly expected to lower rates, though economists are still split over whether there will be a quarter-point or half-point cut.

The Dow rose 101.45 points, or 0.74 percent, to 13,727.03. The Standard & Poor’s 500-stock index rose 11.30 points, or 0.75 percent, to 1,515.96. The Nasdaq composite index added 12.79 points, or 0.47 percent, to 2,718.95.

The National Association of Realtors gave Wall Street reason to be optimistic yesterday when it said that its forward-looking index of United States home sales rose in October for the second consecutive month. Though investors still expect the housing market to remain weak well into 2008, the association is forecasting that sales and prices will start recovering modestly next year.

Yesterday, the Swiss bank UBS said it would write down about $10 billion of subprime mortgage holdings, which could lead to full-year losses. Its American shares, however, rose $1.18, to $51.66 after the bank revealed plans for an $11.5 billion cash infusion from the government of Singapore and an unidentified Middle Eastern investor.

The UBS announcement came ahead of fourth-quarter earnings from the top United States investment banks. Lehman Brothers will release results Thursday. Goldman Sachs, Morgan Stanley and Bear Stearns are scheduled to report next week.

After the closing bell, Washington Mutual said it would record a $1.6 billion write-down on its home loan business as it announced plans to discontinue all subprime mortgage lending and eliminate 2,600 positions in the home loan segment. Shares of Washington Mutual closed up 85 cents, at $19.88. The shares fell $1.68, to $18.20 in after-hours trading.

McDonald’s said that global same-store sales, or sales at stores open at least a year, rose 8.2 percent in November. Shares of McDonald’s, one of the 30 Dow components, rose $1.74, to $61.90.

Shares of another Dow component, Caterpillar, advanced after a Bear Stearns analyst highlighted the company’s focus on China, where the construction market is expected to keep surging. Shares of Caterpillar rose $2.38, to $76.58.

Oil prices were volatile amid end-of-year position-taking and anticipation of the Fed meeting. Light, sweet crude closed down 42 cents, to $87.86 a barrel on the New York Mercantile Exchange.

Advancing issues outnumbered decliners by slightly less than two to one on the New York Stock Exchange. Consolidated volume came to 2.81 billion shares, compared with 2.88 billion shares on Friday.

Bond prices fell. The price of the 10-year Treasury note fell 13/32, to 100 24/32. The yield, which moves in the opposite direction of the price, rose to 4.16 percent, from 4.10 percent late Friday.

Following are the results of yesterday’s auction of three-month and six-month Treasury bills:

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