Calm before the Fed

Major gauges hover in a tight range as investors welcome drop in oil, but hold back as Fed meets.

June 29, 2005: 11:58 AM EDT

NEW YORK (CNN/Money) - Stocks edged higher Wednesday, supported by falling oil prices and Oracle's strong earnings, but gains were limited ahead of Thursday's expected interest-rate hike from the Federal Reserve.

The Dow Jones industrial average (up 3.07 to 10,408.70, Charts) and the broader Standard & Poor's 500 (up 0.89 to 1,202.46, Charts) index both gained a few points around 2-1/2 hours into the session.

The Nasdaq composite (up 3.77 to 2,073.66, Charts) rose about 0.2 percent.

"The Fed is meeting today and tomorrow, so I don't think we get much action leading up to tomorrow's announcement," said John Hughes, market analyst at Shields & Co. "It's not a bad day, by any means, but it's a quiet one."

Falling oil prices and Oracle's improved earnings were welcomed by investors. But market action was muted amid the start of the two-day Federal Reserve meeting.

Oil prices slipped, extending earlier losses after the weekly oil inventory report showed a larger-than-expected rise. U.S. light crude oil for August delivery sank $1.10 to $57.10 a barrel on the New York Mercantile Exchange.

Crude hit an all-time closing high of $60.54 on Monday, holding stocks in check; a 4 percent tumble in oil prices led to a stock market rally Tuesday.

Oracle (up $0.62 to $13.45, Research), one of the largest software makers, reported fiscal fourth-quarter earnings and sales that rose from a year ago and beat forecasts and issued guidance in line or above the Street's estimates for the current quarter and fiscal 2006. The stock jumped about 5 percent.

Troubled insurer AIG (up $2.47 to $57.64, Research) rallied 4 percent after posting improved quarterly results late Tuesday. The company, a Dow component, is facing lawsuits and regulatory probes for overstating earnings over a five-year period.

Shares of General Mills (down $2.48 to $48.13, Research) -- which makes Cheerios and other foods -- slipped after reporting weaker-than-expected quarterly earnings.

Market breadth was barely positive. On the New York Stock Exchange, winners beat losers four to three on volume of 510 million shares. On the Nasdaq, advancers narrowly topped decliners on volume of 730 million shares.

GDP grows faster than forecast
Investors also welcomed a higher-than-expected revision to first-quarter gross domestic product growth.

GDP grew at a 3.8 percent annual rate in the quarter, revised up from earlier reads. Economists surveyed by Briefing.com thought GDP would grow at a 3.7 percent rate.

Meanwhile, investors are awaiting Thursday's statement from the Federal Reserve. The central bank ends its two-day policy meeting that day, and another quarter-point rate hike is widely expected. As such, what the Fed has to say in the statement will be watched closely for hints about future rate hikes.

A rate hike would be the ninth in a row, bringing the Fed funds rate, an overnight bank lending rate, to 3.25 percent.

Treasury bonds gave up early gains to edge lower, raising the yield on the 10-year note to 3.98 percent from 3.97 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and yen.

COMEX gold fell 70 cents to $437 an ounce