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Fed Leaves Door Open for Stimulus

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NEW YORK (AP) -- Stocks and bonds rose Tuesday after the Federal Reserve said it was ready to provide more help to the economy if necessary.

The Fed didn't announce new purchases of government debt or other specific measures to help the economy now, but it did leave the door open to such steps in the future, as investors were hoping.

The central bank said that inflation remains below levels that indicate a healthy economy, and that it was ready to act to provide "additional accommodation" to support the recovery. That could mean more purchases of Treasury bonds or other debt, which would keep interest rates low and hopefully encourage borrowing.

Stocks had been trading lower ahead of the Fed's announcement but turned higher in the afternoon after the central bank's statement was released.

The Dow Jones industrial average rose 38.14 points, or 0.4 percent, to 10,791.76. It had been trading slightly lower for most of the day.

Broader indexes were mixed. The Standard & Poor's 500 index slipped 0.11, or 0.01 percent, to 1,142.60, while the Nasdaq composite rose 0.47, or 0.02 percent, to 2,356.30.

Treasurys rose after the Fed's announcement, sending interest rates lower. The yield on the 10-year Treasury note fell sharply to 2.60 percent from 2.70 percent the day before. Its price jumped 90.6 cents to $100.18. The yield is a common benchmark for setting interest rates on corporate debt and mortgages.

The gains in stocks extended a three-week rally that has defied expectations of a slump in September, which is historically a weak month for stocks. The Dow is up 7.9 percent so far this month, and broader indexes are up even more. The S&P is up 9.1 percent, the Nasdaq 11.6 percent.

Stocks have rallied throughout the month on signs that the economy continues to grow, even though the expansion remains sluggish. In the latest signal, the Commerce Department reported that construction of homes and apartments rose last month to the highest level since April. Building applications, a sign of future activity, also rose in August.

In corporate news, steep discounts and higher costs drove ConAgra Foods Inc.'s fiscal first-quarter profit lower. Shares of the company, which owns the Chef Boyardee and Peter Pan foods brands, dove 96 cents or 4.3 percent, to $21.41.

Cruise line operator Carnival Corp. reported a 22 percent jump in quarterly profits as demand was strong during the summer. It also raised its full-year earnings outlook well above analysts' forecasts. Shares rose 63 cents to $37.69.

Clorox Co. said it would sell its car-care brands such as Armor All and STP to a private equity firm for $780 million in cash. Clorox shares fell 73 cents to $66.88 after announcing the sale of the division, which had accounted for about 5 percent of its total revenue.

The dollar fell against other major currencies, while gold prices continued to hover near record highs.

Rising stocks were about even with falling ones on the New York Stock Exchange where volume came to 700 million shares.

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