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updated 12/15/2005 7:22:33 AM ET 2005-12-15T12:22:33

Stocks rallied on strength in industrial shares Wednesday, pushing a broad market index to its highest close in more than four years, although technology shares struggled after Apple Computer was downgraded by two brokerages.

Major Market Indices

The S&P 500, one of the broadest and most widely used stock market indicators, gained 5.31 points or 0.4 percent to close at 1,272.74, the highest level since June 2001. The Dow Jones industrial average gained 60 points, or about 0.6 percent, while the technology-laced Nasdaq composite index fell 2 points or 0.1 percent.

The dollar plunged after a report showed the U.S. trade deficit hit a record in October, deepening overnight losses on concerns the Federal Reserve is nearly done raising interest rates.

Among the day's biggest industrial gainers were Boeing, which announced an order from Qantas Airways Ltd. for 65 Boeing 787 Dreamliner jets, and aerospace giant Honeywell, which raised its projection for 2006 earnings.

Pharmaceutical stocks also rose with Pfizer Inc., which announced a 26 percent dividend increase Monday, leading the way.

“Big stocks are finally capturing some attention,” said Phil Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis.

Bear Stearns and Banc of America cut their ratings on Apple, which fell 5.4 percent to $70.95, making it the biggest drag on the Nasdaq index.

The second-biggest drag was Microsoft Corp., which fell 0.6 percent to $26.99. On Tuesday, the software maker warned users of its Windows operating system of a “critical” security flaw in its software that could allow attackers to take complete control of a computer.

(MSNBC is a joint venture of Microsoft and NBC.)

On Tuesday, the central bank’s rate-setting committee raised interest rates a 13th straight time but signaled its credit-tightening cycle was winding down.

Stocks rallied following the news, and the Dow has gained about 116 points in the last two days.

“There’s a fairly consistent theme running through all of the markets, which is tied to the idea that the Fed is nearing the end of the tightening cycle. It was the combo that the Fed’s almost done and the import price number was down,” said Jim Paulsen, chief investment officer at Wells Capital Management.

While the dollar’s move likely had little impact on the stock market, a weaker dollar in general is positive for stock gains, Paulsen said. “Anything that elongates the recovery cycle and keeps growth growing is a boon to profits,” he said.

Shares of energy-hungry industrials received an added boost when the Energy Information Administration reported an increase in crude inventories of 900,000 barrels. A decline had been expected.

On Tuesday, as expected, the U.S. central bank’s rate-setting Federal Open Market Committee voted unanimously to lift the benchmark federal funds rate by a quarter percentage point to 4.25 percent, the highest level since April 2001. The Fed signaled that its cycle of interest rate hikes may be nearing an end.

Reuters and The Associated Press contributed to this report.


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