US stock markets gain as rate cut sensed

NEW YORK, Dec 7, 2007 (AFP) - Wall Street enters the home stretch of 2007 in an upbeat mood as investors brace for a meeting of the Federal Reserve which is widely expected to yield a third straight cut in US interest rates. Bond prices weakened in the past week as investors moved into stocks. The yield on the 10-year Treasury bond rose to 4.120 percent from 3.972 percent a week earlier, and that on the 30-year Treasury climbed to 4.585 percent from 4.403 percent. Bond prices and yields move in opposite directions.

The market generally cheers interest rate cuts and most economists are calling for Fed policymakers, led by chairman Ben Bernanke, to reduce US borrowing costs by a quarter percentage-point on Tuesday.

Investors believe the central bank will trim its short-term Fed funds rate to help underpin economic momentum which is expected to slow in coming months.

In the week to Friday, the Dow Jones Industrial Average surged 1.90 percent to 13,625.58.

The broad market Standard & Poor's 500 advanced 1.59 percent to 1,504.66 and the tech-heavy Nasdaq jumped 1.70 percent to 2,706.16.

Market participants said the past week's stock gains were bolstered by a mortgage rescue plan backed by US President Geor