Fed helps Dow, S&P 500 hit new highs

Stocks pushed into record territory this afternoon after minutes from the Federal Reserve's Sept. 18 meeting showed the Fed is now more concerned about keeping the economy strong and less worried about inflation.

Wall Street concluded that the Fed isn't likely to raise interest rates anytime soon.

The Dow Jones industrials and the Standard & Poor's 500 Index both closed at new highs, and the Nasdaq Composite Index closed above 2,800 for the first time since Jan. 30, 2001.

The Dow closed up about 121 points to nearly 14,165 -- 77 points above the closing high of 14,087.55, set on Oct. 1. The close was the 34th new high of the year. The Dow also hit a new intraday high of 14,166.97 at 3:40 p.m.

The S&P 500 was up nearly 13 points to 1,565, about seven points above its record close on Friday. The Nasdaq was up 17 points to 2,804.

In a third-quarter earnings report issued after the close, aluminum giant Alcoa (AA, news, msgs) boosted the size of its stock buyback.

The Federal Open Market Committee, the Fed's rate-making body, cut its key federal funds rate from 5.25% to 4.75% on Sept. 18 to help the credit markets deal with the near freeze-up that had threatened the global financial system. That rate cut set off the stock market's biggest rally of the year.

The minutes from that meeting show no disagreement with the decision to cut rates. Indeed, the committee worried that without action there was a risk that "tightening credit conditions and intensifying housing correction would lead to significant broader weakness in output and employment."

Stocks rallied today because the Fed minutes suggest the central bank doesn't see inflation as a threat: "It was no longer appropriate to indicate that a sustained moderation in inflation pressures had yet to be shown." The Fed will still watch for signs of inflation -- a key reason the central bank exists.

If there was a downside to the minutes, it was that the central bankers didn't commit themselves to additional rate cuts. The stock market is assuming the Fed will cut rates at least once more this year. The FOMC meets on Oct. 30-31 and Dec. 11.

A beer deal gives the market some froth

Before the Fed minutes came out, the market had been mostly higher in part in reaction to Molson Coors (TAP, news, msgs) and SABMiller's (SBMRY, news, msgs) announcement that they will combine their North American operations. Molson Coors shares shot up more than 10% to $56 today, the biggest gain among stocks in the S&P 500 Index. SABMiller's American depositary unit, the U.S. equivalent of a share, was up 1.7% to $30.30 in New York. In London, the shares closed at 1,497.25 pence -- $30.53 in U.S. dollars.

• Video: More on the big beer deal

The joint venture, to be called MillerCoors, would have annual revenue of about $6.6 billion and yield about $500 million in annual cost savings, The Wall Street Journal said. And the idea is to be able to challenge the dominance of the dominance of Anheuser-Busch (BUD, news, msgs).

At the same time, the tone of the market improved after analysts raised earnings estimates for Microsoft (MSFT, news, msgs) and the target price for Internet giant Google (GOOG, news, msgs).

Goldman Sachs raised its profit estimates on Microsoft for fiscal 2008, 2009 and 2010. Goldman Sachs cited "Halo 3" and the acquisition of online advertising firm aQuantive for its optimistic outlook. Microsoft was up 0.9% to $30.10. (Microsoft is the publisher of MSN Money.)

• Get free, real-time stock quotes on MSN Money

Meanwhile, Google, which closed at record highs Monday, was up 0.9% to $615.18 today after Banc of America Securities raised its price target to $670 from $620.

The market had been struggling against weak financial stocks and a falling dollar. Countrywide Financial (CFC, news, msgs) was off 4.2% to $19.26.

The lower dollar was one reason why oil prices finished higher today. Crude oil closed at $80.26 a barrel in New York, up 1.6% from Monday. Energy stocks moved higher and were among the market leaders.

Alcoa boosts share buyback plan

Alcoa kicked off the earnings season reporting that third-quarter profit rose, boosted by a gain on the sale of its stake in Chinese aluminum company Chalco.

But the big news was that the company is increasing its share buyback from 10% of outstanding shares to 25%, which could cost about $6.7 billion. Wall Street appeared satisfied. Alcoa shares had closed up 3.7% to $39.72 in regular trading and moved up an additional 2 cents to $39.74 in after-hours trading.

Bruce Zaro, chief technical adviser at Delta Global Advisors called the share repurchase "somewhat surprising." But, he told Reuters, "The good news is that the cash flow has been so strong that they are able to do this."

Net income was $555 million, or 63 cents a share, compared with $537 million, or 61 cents a share, in the year-ago period.

Earnings from continuing operations were 64 cents a share; the Reuters consensus estimate had been 66 cents a share. Revenue fell about 2.6% to $7.4 billion from $7.6 billion a year ago, but that was a touch better than expected.

Last week, Alcoa said it expected to record a total of $845 million in charges in the third quarter related to pending sales of its packaging and consumer business and its automotive castings business and the restructuring of its electrical and electronic solutions business in the Americas and Europe.

During the summer, Alcoa had been considered a takeover target after its $27 billion bid to acquire rival Alcan failed; Alcan went with British mining company, Rio Tinto (RTP, news, msgs).

Speculators bid Alcoa shares up to nearly $48, expecting Australian mining company BHP Billiton (BHP, news, msgs) to swoop in with a bid.

When a deal didn't materialize, the shares fell about 20%. It is still up nearly 28% this year after mediocre performances in 2005 and 2006, thanks to the big run-up in global demand for aluminum and because the company may still be a takeover candidate.

Retailers moan: It's too warm

Retail sales in September rose at the slowest pace in five months, Bloomberg News reported, as consumers cut back spending. The data suggest that results for the holiday season may be the worst in five years.

Sales at stores open at least 12 months gained 2%, Bloomberg reported, citing data from the International Council of Shopping Centers and UBS Securities. The September increase was the smallest since same-store sales fell 1.9% in April.

NBC is buying Oxygen Media

General Electric's (GE, news, msgs)NBC said it had agreed to spend $925 million to acquire Oxygen Media, the female-oriented cable network co-founded by Oprah Winfrey and run by Geraldine Laybourne. It will be the Peacock's biggest deal since the May 2004 formation of NBC Universal, which is 80% owned by GE and 20% owned by Vivendi.

Oxygen's target audience of women 18 to 49 complements that of NBC's iVillage Internet properties. NBC bought iVillage in May 2006 for about $600 million. Year to date, Oxygen estimates its prime-time viewership has risen 19% among its target demographic and 7% among all households.

Just as Oxygen should benefit from an expanded online presence within iVillage, iVillage could use a boost itself, Forbes.com noted today. Although iVillage has long billed itself as "the No. 1 online destination for women," that hasn't been true since May, according to comScore Media Metrix. In August, iVillage recorded 15.4 million unique visitors, up 3% from a year earlier, but short of the 20 million unique users snared by upstart Glam Media, which saw traffic skyrocket 677%.

GE shares were up 1.2% today to $42.02.

Yum Brands shares jump on strong earnings

Shares of Yum Brands (YUM, news, msgs) were sharply higher this morning after the company delighted Wall Street late Monday with a 17% gain in third-quarter net income.

The parent of KFC, Pizza Hut and Taco Bell said quarterly earnings rose to $270 million, or 50 cents a share, from $230 million, or 42 cents a share, a year ago. Sales hit $2.56 billion, up 12.3% from a year ago.

• Video: Money manager Hugh Johnson looks at today's market

Analysts had expected earnings of 45 cents a share. The company now expects full-year earnings to rise 13%, instead of 12%, to $1.65 a share. Thomson Financial said the consensus estimate was for $1.64 a share.

Yum shares were up 5% to $38.11 and were the fifth-best S&P 500 performer. The stock had jumped 5.7% to $36.29 on Monday.

Sprint's Forsee resigns

Late Monday, Wall Street got from cell phone company Sprint Nextel (S, news, msgs) what it seemed to want: the resignation of Gary Forsee as CEO and chairman.

But the stock was down this morning anyway, falling 1.2% to $18.28.

Investors have become increasingly unhappy with Sprint Nextel's stock performance. The stock is down 31% from an August 2005 peak. The S&P 500 is up 25% in the same period.

Sprint also confirmed that the company's already poor financial performance in recent months is deteriorating. Sprint is in intense competition with market leaders Verizon Communications (VZ, news, msgs) and AT&T (T, news, msgs).

Sprint expects to report a third-quarter net loss of approximately 337,000 subscribers in the key "post-paid" market segment -- customers who sign annual contracts and pay monthly bills. The company also expects operating profits and revenue for 2007 to be "slightly below" the previously indicated range of $11 billion to $11.5 billion for operation profit and $41 billion to $42 billion for revenue.

Forsee's departure comes just two years after he engineered the $35 billion purchase of cellular operator Nextel Communications to keep pace with rapid consolidation in telecommunications.

The Wall Street Journal reported last week that the company was actively seeking a replacement for Forsee.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$80.26	$79.02	$1.24	-1.71%	31.47%
Heating oil (per gallon)	$2.1853	$2.1596	$0.0257	-2.35%	36.76%
Natural gas (per million BTU)	$6.8630	$6.8460	$0.0170	-0.10%	8.95%
Unleaded gasoline (per gallon)	$2.0202	$2.0002	$0.0200	-2.33%	26.10%

Oil money pours into Treasurys

The biggest quarterly rally for U.S. government securities in five years is getting an extraordinary boost from the burgeoning reinvestment of petrodollars by the Organization of Petroleum Exporting Countries, Bloomberg News says.

OPEC members increased their holdings of Treasurys 12% this year through July to $123.8 billion, Treasury Department data show.

OPEC's share of U.S. debt is likely to grow. Oil prices have risen 31% since December, and that will raise OPEC revenue -- 4% to $630 billion this year and 9% to $688 billion in 2008, according to estimates by the U.S. Department of Energy.

Petroleum exporters are adding to holdings of U.S. debt three times faster than other foreign investors, the Treasury data show. Yields on 10-year notes are 21 basis points lower because of the additional petrodollar reinvestment, consulting company McKinsey said last week.

"Oil revenues are up; they're still in dollars, and it has to be put to work," said David Ader, head of U.S. government bond strategy in Greenwich, Conn., at RBS Greenwich Capital, one of the 21 primary dealers that underwrite U.S. government debt. "It bodes well for U.S. debt."

The yield on the 10-year Treasury note finished at 4.65% today, up from 4.64% on Monday and down from a high of 5.114% on June 22.

Sallie Mae sued to defend buyout deal

As expected, SLM Corp. (SLM, news, msgs), the student loan company better known as Sallie Mae, went to court late Monday to try to force a buyout group led by J.C. Flowers to buy the company for $25 billion or pay a breakup fee of $900 million. The suit was filed in Delaware Chancery Court.

The Flowers-led group, which includes JPMorgan Chase (JPM, news, msgs) and Bank of America (BAC, news, msgs), claimed in a letter last week that a "material adverse event" -- a new student-lending law that will cut subsidies to lenders -- could cut Sallie Mae's revenue 20%. Under the terms of its deal, Flowers says, it can walk away from the deal without paying the $900 million.

The buyout group had made a new offer: $50 a share for SLM -- about $21 billion -- and an additional $10 a share in payments if Sallie Mae meets financial targets. Sallie Mae was down 1.4% to $48.50 today. It's down about 15% from a July 9 peak.

Newmont moves to shore up reserves

Newmont Mining (NEM, news, msgs) will buy Canadian producer Miramar Mining (MNG, news, msgs) for $1.52 billion, as Newmont moves to improve its fading reserves.

Newmont will pay $6.25 (Canadian) a share, a 20% premium to Miramar's closing price of $5.19 (Canadian) on Friday. Canadian markets were closed Monday for Canadian Thanksgiving.

Last month, Newmont warned of higher costs and dwindling reserves from its older, more tapped-out mines and said it is not finding new lodes fast enough to keep up with its production rates, thinning its reserves.

Miramar, a Canadian gold company, controls the Hope Bay Project in Canada's Nunavut Territory, one of the largest undeveloped gold projects in North America.

Newmont was up 2.7% to $46.02 today. Miramar soared nearly 24% to $6.38 in New York.

Short hits from the markets -- 4 p.m. ET

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	3.910%	3.865%	0.045	5.68%	-19.96%
5-year Treasury note yield	4.368%	4.338%	0.030	3.29%	-7.08%
10-year Treasury note yield	4.651%	4.638%	0.013	1.57%	-1.25%
30-year Treasury bond yield	4.864%	4.861%	0.003	0.64%	0.95%
Currencies
U.S. Dollar Index	78.41	78.55	-0.14	1.01%	-5.85%
British pound in dollars	$2.0392	$2.0387	0.0004	-0.41%	4.06%
Dollar in British pounds	£0.4904	£0.4905	-0.0001	0.41%	-3.90%
Euro in dollars	1.4112	1.4063	0.0050	-1.09%	6.92%
Dollar in euros	€ 0.7086	€ 0.7111	-0.0025	1.10%	-6.47%
Dollar in yen	¥117.18	¥117.36	-0.18	2.12%	-1.55%
Commodities
Gold	$743.10	$738.70	$4.40	-0.92%	16.47%
Copper	$3.6175	$3.6130	$0.005	-0.62%	26.00%
Silver	$13.5830	$13.3600	$0.22	-2.42%	3.29%
Crude oil (NYMEX) (per barrel)	$80.26	$79.02	$1.24	-1.71%	31.47%

By Charley Blaine