Stocks rally on hopes of economic growth
NEW YORK — US stocks surged strongly on Tuesday, boosted by growing hopes the US Federal Reserve will offer new stimulus measures to kick-start a sluggish economy.
The Dow Jones Industrial Average packed on 322.11 points (2.97 percent) to finish at 11,176.76.
The broader S&P 500 leaped 38.53 points (3.43 percent) to 1,162.35, while the tech-heavy Nasdaq Composite added 100.68 points (4.29 percent) to stand at 2,446.06.
Stocks dipped slightly after a rare US East Coast earthquake rattled Wall Street office buildings, but then resumed their rally and climbed higher to post their best gains in more than a week.
Hopes that Federal Reserve chairman Ben Bernanke will hint at a loosening of monetary policy in a speech later this week, plus better-than-expected economic data from China and Europe, helped power the rally, analysts said.
“The bottom line is that investors are starting to believe that a recession is not in the cards, and although growth will be slow, it will be positive,” said Hugh Johnson, of Hugh Johnson Advisors.
“There is some expectation that Bernanke will say things that are encouraging on Friday,” he added.
US stocks have slumped for the past four weeks amid fears of a new economic slowdown in the United States and fallout from the eurozone’s sovereign debt crisis.
Industrials and tech companies performed strongly on Tuesday, with Boeing up 4.1 percent, Caterpillar up 3.9 percent, IBM up 3.4 percent and Microsoft up 3.1 percent.
A jump in oil prices, sparked by uncertainty about the future of Libyan oil output, gave a big boost to energy firms. ExxonMobil surged 5.0 percent, while Chevron jumped 4.3 percent.
Bank of America tumbled 1.9 percent as calls mounted for it to raise more capital. Investors reacted negatively to news that BofA was clinging to at least a five percent stake in China Construction Bank.
The troubled US lender now holds a 10 percent stake in Beijing-based CCB, which is majority-owned by the Chinese government.
Bullish sentiment was also encouraged by the release of purchasing managers’ index data for August pointed to signs of strength in the economies of the eurozone and China.
The eurozone’s PMI, compiled by London-based researchers Markit, held steady at 51.1, faring better than analysts had feared.
HSBC’s preliminary PMI for China rose to 49.8 in August from 49.3 in July, a slight pick-up which suggested that China’s export-driven economy was doing better than expected despite global economic jitters.
Bond prices fell. The yield on the 10-year Treasury note climbed to 2.14 percent from 2.09 percent late Monday, while that on the 30-year bond rose to 3.48 percent from 3.40 percent.
Bond prices and yields move in opposite directions.