US stocks open higher ahead of Fed decision

US stocks rose moderately in early Wednesday as investors awaited the Federal Reserve's decision on interest rates and policymakers' take on the economy.

Though data are due later in the morning on new home sales and domestic oil inventories, investors will likely focus on the Fed decision and its accompanying comments about the economy and the threat of inflation.

A Commerce Department report that orders for big-ticket manufactured items were essentially flat in May didn't appear to sway investor sentiment. The innocuous reading left Wall Street able to keep its attention on the central bank's next move.

Wall Street expects the Fed will stand pat on rates after cutting them quickly earlier this year, and to signal it could start raising rates again. But most market watchers contend the central bank is hesitant to begin hiking rates now, even with rising prices, because an increase could hobble the economy.

At its last meeting, in April, the Fed lowered rates by a quarter point, leaving the key federal funds rate at 2 percent. When the central bank began its campaign to inject the economy with cheaper money in September, the funds rate, which banks charge each other for overnight loans, stood at 5.25 percent. Policymakers were worried that tightening credit over fears souring mortgage debt would destabilize the economy.

The Fed's decision is due at 2:15 p.m. EDT. Before then, investors expect to receive figures sales of new homes for May and weekly oil inventory figures.

In the first hour of trading, the Dow Jones industrial average rose 35.34, or 0.30 percent, to 11,842.77.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 9.82, or 0.75 percent, to 1,324.11, and the Nasdaq composite index rose 24.71, or 1.04 percent, to 2,392.99 after three straight sessions of declines.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.12 percent from 4.10 percent late Tuesday. The dollar was higher against other major currencies, while gold prices fell.

Light, sweet crude slipped 85 cents to $136.15 in premarket electronic trading on the New York Mercantile Exchange.

The run-up in oil has weighed on the stock market. The Fed's loosening of interest rates to help the economy has also weakened the dollar and helped push prices for oil and other commodities higher. Wall Street's pullback amid concerns about inflation and its effect on the economy has left stocks down 10 percent for the year and at their lowest levels since mid-March.

The rate hikes have also left other markets more attractive to currency investors than the U.S. In Europe, where higher interest rates offer better returns, European Central Bank President Jean-Claude Trichet said Wednesday he hasn't indicated that investors should expect a series of interest rate hikes in the coming months. While the ECB is expected to raise rates at its July 3 meeting, he said he wouldn't "precommit" to rate hikes beyond that.

The Commerce Department said orders for durable goods -- which include aircraft and machinery but also consumer items like cars, refrigerators and computers -- were essentially unchanged in May, as economists had expected. The report indicates that orders for aircraft and computers offset weakness elsewhere.

In corporate news, Barclays PLC rose $1.46 or 5.9 percent, to $26.16 after announcing plans to raise $8.85 billion by issuing shares. The investments will come from the Middle East and Asia and will help the bank improve its financial position following losses in the U.S. mortgage market.

Darden Restaurants, the operator of the Olive Garden and Red Lobster chains, rose $1.40, or 4.4 percent, to $33 after saying it expects earnings to grow by 14 to 15 percent in 2009. The company also reported that it swung to a profit from a loss in its fiscal fourth quarter following strong sales at the Olive Garden.

Monsanto Co.'s fiscal third-quarter earnings jumped 42 percent following strong performance by its Roundup herbicide and the company's seeds and traits business. The company also raised its profit forecast for the year. The stock fell $6.51, or 4.8 percent, to $129.28 after the company's revenue forecast fell short of Wall Street's expectations.

Ford Motor Co.'s Volvo division said it handed layoff notices to 1,200 workers in Sweden following a $151 million loss in the first quarter amid slumping U.S. sales. The stocks rose 10 cents to $5.42.

Overseas, Japan's Nikkei stock average slipped 0.14 percent. In afternoon trading, Britain's FTSE 100 rose 0.37 percent, Germany's DAX index added 0.51 percent, and France's CAC-40 was rose 1.10 percent.

(Agencies)