US investors flocked to blue chip stocks yesterday, pushing the Dow past its all-time closing high, as the market looks beyond the Federal Reserve's pivotal interest rate meeting today.
By late morning the Dow Jones industrial average was up 127 points, or 1.14 per cent, at 11,226.33. It closed up 199.15 at 11,299.76.
Europe's stock markets also closed firmer as a wave of confidence blew through them ahead of the long-awaited announcement on US interest rates.
Banking and other financial shares posted some of the most prominent gains while recently fashionable economy-sensitive cyclical stocks underperformed the broader markets.
The Federal Reserve's policy-setting group, the Federal Open Market Committee, is expected today to implement an increase of of 0.25 of a percentage point in the key Fed funds rate, the rate that banks charge each other for overnight loans.
Despite what some pundits say, the market is not waiting for the Fed, said Mr Alfred Goldman, technical analyst at A G Edwards and Sons in St Louis. "That's hogwash. The market doesn't wait," he said.
"The Dow is near an all-time high, but the S&P isn't near a high," said Mr Jonathan Dodd, a technical analyst at Morgan Stanley Dean Witter. "People are going for the blue chip stocks ahead of this unknown period."
Meanwhile, currency traders will watch the FOMC intently for hints of whether further policy tightening may be on the way, analysts said.
Currency strategists fear that any sign the Fed plans to raise rates again could send US stocks and bonds into a downward spiral and pull the dollar in the same direction.
Market-watchers will scour the statement that accompanies any rate change to see whether the Fed discloses its near-term policy outlook, known as its "bias".
"If they say there is a bias to tighten, markets will take it on the chin," said Mr Tomas Jelf, currency strategist at Warburg Dillon Read.
Any surprises or unexpected hints from the Fed could shake up the dollar, which has taken a beating in recent weeks from the surging Japanese yen and Europe's single currency.
However, the dollar made solid gains against Europe's single currency and the Japanese yen in early trade yesterday as dealers took their cue from firm US asset markets.
