US stocks advanced on Wednesday as the energy sector benefited from rising oil prices. But gains were limited as investors hesitated to place major bets a day before the Federal Reserve's statement on the future direction of interest rates.
Analysts are nearly unanimous that the Fed will raise its target fed funds rate on Thursday, and a majority of analysts are leaning toward a rate increase in August. The wording of the Fed's statement has kept investors uncertain amid lingering concerns that the central bank's credit tightening will slow economic growth and hurt corporate profits.
In otherwise lackluster trading, oil stocks rose, led by Exxon Mobil Corp, as crude prices rose above $72. Exxon, the world's biggest publicly traded oil company, rose more than 2 percent and was the biggest positive influence on both the Dow and the S&P 500.
The Dow Jones industrial average gained 48.82 points, or 0.45 percent, to finish at 10,973.56. The Standard & Poor's 500 Index added 6.80 points, or 0.55 percent, to end at 1,246. The Nasdaq Composite Index advanced 11.59 points, or 0.55 percent, to close at 2,111.84.
Trading was moderate on the NYSE, with about 1.49 billion shares changing hands, below last year's daily average of 1.65 billion, while on Nasdaq, about 1.60 billion shares traded, below last year's daily average of 1.80 billion. Advancing stocks outnumbered declining ones by a ratio of almost 8 to 5 on the NYSE and by about 8 to 7 on Nasdaq.
For the 17th time in two years, the US central bank is expected to lift its benchmark fed funds rate by a quarter-percentage point to 5.25 percent on Thursday at the end of the two-day meeting. Even more important, the Fed will issue an accompanying statement that may give clues about future rate increases.
US crude oil for August delivery rose 27 cents to settle at $72.19 a barrel on the New York Mercantile Exchange on concern about heavy US demand for gasoline before the July 4 Independence Day holiday.
US government weekly inventory data showed US crude oil and gasoline supplies fell more than expected last week. Merrill Lynch on Wednesday revised upward its price forecast for US crude to $68.25 a barrel for the second half of 2006 from $65.50. Merrill also raised its rating on oil producer and refiner Hess Corp to "buy" from "neutral".
Hess stock jumped 4.6 percent, or $2.21, to $50.41 on the New York Stock Exchange.
Exxon Mobil shares climbed 2.5 percent, or $1.47, to $61.12 on the NYSE, while shares of rival Chevron Corp rose 2.1 percent, or $1.26, to $61.36.
A sharp drop in the shares of Apple Computer Inc weighed on the Nasdaq Composite Index. The stock of the maker of the iPod digital music player fell 2.5 percent, or $1.41, to $56.02 as some analysts expressed concerns about Apple's outlook.
In the new-issue market, shares of preppy clothing retailer J. Crew Group Inc soared 27.8 percent, or $5.55, to $25.55 in their debut on the NYSE. The IPO was priced on Tuesday at $20 a share.
Helping all three major indexes were shares of Intel Corp. The world's largest semiconductor maker said on Tuesday it would sell its money-losing communications processor business to Marvell Technology Group Ltd for $600 million.
Intel shares, among the components in the Dow, the Nasdaq 100 and the S&P 500, jumped 3.4 percent, or 61 cents, to $18.66 in Nasdaq trading. Marvell shares fell 4.1 percent, or $1.82, to $42.32 on Nasdaq.