Stocks stabilize on sliver of hope for stimulus

    NEW YORK (AP) ? Investors sent stocks higher Tuesday after minutes from the Federal Reserve’s last meeting raised hopes that more economic stimulus might be on the way.

    Several Fed officials said that the government would have to consider new monetary policy to stimulate the economy, especially if growth remains too slow to reduce the unemployment rate.

    The Standard & Poor’s 500 index and the Dow Jones industrial average rose after the Fed released the minutes from its June 21-22 meeting at mid-afternoon. They had been bouncing between small gains and losses earlier.

    The S&P 500 rose 3 points, or 0.2 percent, to 1,322 in afternoon trading. The Dow rose 24 points, or 0.2 percent, to 12,530.

    The Fed ended a $600 billion bond-buying program in June, and many investors had been hoping the Fed would consider additional steps to keep interest rates low and encourage lending.

    Investors are still worried that Italy might become the next European country to need help managing its debts. A successful auction of new Italian government bonds and a promise to fast-track that country’s austerity measures helped ease those fears earlier in the day.

    A default by Italy, the third-largest economy in Europe, would cause far more damage to the global financial system than one by Greece, which is much smaller.

    Italian finance minister Giulio Tremonti said budget cuts originally scheduled for August would be passed by this Sunday. The news sent Milan’s main stock index up 1.2 percent.

    Investors also felt some relief after a meeting of 17 finance ministers Monday resulted in a statement that implied they were open to buying distressed Greek bonds.

    “They are trying to staunch the bleeding,” said Quincy Krosby, market strategist for Prudential Financial. “That has reassured investors that there are, in essence, buyers of last resort.”

    Investors had assumed Italy would be able to manage its heavy debt load in part because of a high personal savings rate among its citizens. But after concerns arose last week that Italian and Spanish banks might not pass upcoming stress tests, stock in those countries’ largest banks fell sharply. Results of the tests are expected to be announced Friday.

    U.S. Bank stocks rose as tensions eased about Europe’s financial crisis. At the center of the panic over European government debt is the fear that the European banking system could be hurt if the government debt structure crumbles in Greece or other countries. That would affect a global network of financial institutions, potentially freezing up lending and affect U.S. companies that do business internationally.

    MBIA Inc. rose 8.5 percent after the company agreed to dismiss a lawsuit against Merril Lynch.

    Technology stocks fell following poor results from chip makers. The Nasdaq composite fell for most of the day. It was down 5, or 0.2 percent, to 2,798.

    Microchip Technology Inc. plunged 12 percent, the most of any stock in the S&P 500 index, after the chip maker said it expected lower quarterly revenue and income because of waning demand from car makers. That pushed the stocks of other chip makers lower too. Novellus Systems Inc. fell 11 percent after lowering its own profit forecast, and Texas Instruments Inc. fell 3.9 percent.

    Radiant Systems Inc. rose 30 percent after saying ATM maker NCR Corp. would buy the company, which makes equipment and software for the hospitality and retail industries, for $1.2 billion. But Central Vermont Public Service Corp. fell 2.6 percent after it announced Canada’s Gaz Metro would buy the utility for $472.4 million. Rival bidder Fortis cancelled its offer.

    International Game Technology rose 2.5 percent after a Sterne Agee analyst raised its rating on the company, saying it would likely sell more casino games.

    News Corp. rose 8.2 percent after the beleaguered media company said it would buy back $5 billion worth of its own stock. The company is facing opposition in England to its takeover of British Sky Broadcasting, a highly profitable satellite television operator, because of a widening phone-hacking scandal at its newspapers in Britain.