US stocks rise following Fed's calming words

US STOCKS made their broadest, sharpest gains of August yesterday as the Federal Reserve offered calming words on the growth of the economy.

The blue chips gained momentum over the course of the session, breaking a recent pattern of starting strongly only to weaken late in the day.

Advancing issues outnumbered decliners by an 8-to-5 margin on the New York Stock Exchange, with 1,865 up, 1,171 down and 526 unchanged.

NYSE volume totalled 782.80 million shares, against 831.64 million in the previous session.

The NYSE composite index rose 6.85 to 610.22, and the American Stock Exchange composite index rose 6.60 to 777.37.

The Russell 2000 index of smaller companies rose 3.61 to 426.43.

Traders said the market was ripe for a minor rally following a slump that has left every major market index well below the lofty records reached in mid-July. But most Wall Street players said the advance was fragile.

But the Fed survey, dubbed the "beige book", did note developments that could lead to increased inflationary pressures, most notably widespread labour shortages and scattered reports of higher prices.

The Fed, which raised rates slightly on June 30, has clearly signalled its willingness to raise short-term interest rates for a second time this year, hoping to prevent inflation from creeping into the robust US economy.