Dow edges higher as rate cut seen ahead

By Caroline Valetkevitch

NEW YORK (Reuters) - The Dow industrials rose on Tuesday as investors expected another interest rate cut from the Federal Reserve, while data showing a higher-than-expected rise in orders of durable goods last month eased economic worries.

The Fed's policy-setting Open Market Committee was set to meet on Tuesday and Wednesday, and investors expected the session to result in a rate cut to reinvigorate the economy -- the second cut in about a week -- after signs of increasing weakness in housing and the job market.

Perceived chances of a cut eased slightly after the stronger-than-expected rise in orders for durable goods -- manufactured items meant to last three years or more. But short-term U.S. interest rate futures still showed a rate cut was expected.

Earnings from Dow Chemical Co and others helped to boost sentiment.

"What really matters going forward is the tone and tenor of the labor market. If we get a decent January jobs report, with upward revisions to December, I think the recession and end-of-the-world scenario gets shoved into an open elevator shaft," said Michael Darda, chief economist at MKM Partners LLC in Greenwich, Connecticut.

The Dow Jones industrial average <.DJI> was up 49.18 points, or 0.40 percent, at 12,433.07. The Standard & Poor's 500 Index <.SPX> was up 4.83 points, or 0.36 percent, at 1,358.80. The Nasdaq Composite Index <.IXIC> was down 2.32 points, or 0.10 percent, at 2,347.59.

Stocks briefly pared gains after traders said there was market talk of derivatives losses at JPMorgan Chase & Co . The talk was untrue, people familiar with the matter told Reuters. JPMorgan shares rose 0.3 percent to $45.92.

Data showing U.S. consumer confidence fell in January had little impact on stocks.

Shares of Dow Chemical rose 3.1 percent to $38.77 as it reported earnings above expectations.

Shares of EMC Corp , the world's biggest maker of corporate storage gear, fell 8 percent to $15.56 and were the top drag on the S&P 500 after the company said it expects revenue growth to slow in 2008 as technology companies face a more uncertain economic environment.

(Additional reporting by Ellis Mnyandu; Editing by Kenneth Barry)

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