Rising commodities push industrial stocks higher

NEW YORK -- Stocks pulled well off their highs of the day but still ended up Wednesday after the Federal Reserve said the nation's economy was stabilizing but that problems remain.

The Fed's snapshot of 12 economic regions found that economic activity was "stable," showed "signs of stabilization" or had "firmed" in all areas except the St. Louis region. It also found, however, that consumer spending is expected to increase only because of buying of automobiles generated by the government's brief cash-for-clunkers program.

The prolonged slump in consumer spending has been one of the most serious points of worry for economists, and the Fed's warning about it deflated some of the market's optimism. About 70% of the U.S. economy depends on spending by consumers.

Matt Lloyd, chief investment strategist at Advisors Asset Management, said stocks pulled off their highs following the Fed's report because many investors are fearful of a correction following a 50% surge in the market over the past six months.

"To me there is no conviction behind it," he said of the market's recent gains.

At the close of trading, the Dow Jones industrial average rose 49.88, or 0.5%, to 9,547.22. It had been up as much as 80 points ahead of the report. The Standard & Poor's 500 index gained 7.98, or 0.8%, to 1,033.37, while the Nasdaq composite rose 22.62, or 1.1%, to 2,060.39.

Jeff Kleintop, chief market strategist at LPL Financial Services, said a break in the rally could be good for the market to keep stocks from racing too high, too quickly.