Dow Jones: 11,239.77 (+429.92) Nasdaq: 2,482.52 (+124.83) S&P 500: 1,172.53 (+53.07)US STOCKS rallied the most in more than two years yesterday, as the Federal Reserve said it was prepared to use a range of tools to bolster the economy following Monday's rout in equities.
The Standard and Poor’s 500 gained as much as 2.9 per cent in midday trading, then dropped 1.6 per cent following the Fed’s statement before resuming its advance.
Financial stocks, which paced a slide that erased $1 trillion in market value on Monday, soared more than 8 per cent.
Bank of America and Citigroup jumped at least 13 per cent.
The S&P 500 climbed 4.7 per cent in New York, the biggest advance since March 2009.
“We’ve gone too far, too fast,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland said. “We may have a bit of a back and forth as the buyers and sellers temporarily gain the upper hand. Still, we’re at a point where the market is trying to put a bottom in place. The Fed is clearly setting a situation that could offer them the potential to do something significant, if necessary.”
The Fed pledged for the first time to keep its benchmark interest rate at a record low at least through mid-2013 in a bid to revive the flagging recovery after a worldwide stock rout.
The Federal Open Market Committee (FOMC) discussed a range of policy tools to bolster the economy and said it is “prepared to employ these tools as appropriate”, it said yesterday in Washington.
Three members of the FOMC dissented, preferring to maintain the pledge to keep rates low for an “extended period”.
The S&P 500 slumped 11 per cent in three days, the most since November 2008.
Financial and raw-material companies, which paced the declines in the S&P 500 on Monday, were among the best performers yesterday, rising at least 5.9 per cent.
Companies which are least-tied to the economy, including consumer staples providers and utilities, gained the least yesterday.
General Electric and Johnson and Johnson are among 20 stocks investors should buy for their dividend yields after equities plunged and Treasuries surged in the past two weeks, JPMorgan said. – (Bloomberg)