http://www.seattlepi.com/news/article/Dow-soars-429-points-on-Fed-statement-1786533.php
Dow soars 429 points on Fed statement
NEW YORK (AP) — The Fed spoke — and financial markets rallied.
The Dow Jones industrial average surged more than 429 points, its tenth-highest point gain in history and the biggest since March 2009. It was just one day after the Dow had its worst point decline since 2008.
The Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013. The central bank also said that it has discussed "the range of policy tools" it can use to spur the economy.
Bob Doll, chief equity strategist at BlackRock, said the Fed's decision to hold interest rates at a very low rate for two years is "unprecedented" and called it a kind of "backdoor quantitative easing." In June, the central bank finished a second round of buying Treasury securities, also known as quantitative easing, in hopes of boosting the economy.
"Markets are going to do what they would have done if the Fed went out and bought securities," Doll said. He said he expects investors will return to stocks after the broad sell-off of the least few weeks.
He expects stocks to continue to rally because a slow-growing U.S. economy won't harm corporate profits. As a whole, the companies in the Standard & Poor's 500 index reap more than half their revenue overseas. What's more, companies have already cut costs significantly, have hoarded cash and squeezed more production out of workers. Even as the U.S. economy has slowed, the S&P 500 as a whole was expected to earn record profits this year.
"Corporate America has demonstrated that it can generate good growth and profits despite a weaker U.S. economy," Doll said.
The Dow rose 429.92 points, or 4 percent, to 11,239.77. On Monday, the Dow plunged 634.76 points in the first trading day after Standard & Poor's downgraded the U.S. one notch from its top AAA credit rating to AA+.
The S&P 500 rose 53.07, or 4.7 percent, to 1,172.53. The Nasdaq composite index rose 124.83, or 5.3 percent, to 2,482.52.
At first, markets reacted much differently to the Fed's statement. Stocks fell as much as 205 points after the Fed's 2:15 p.m. EDT statement.
Gold surged more than $50 per ounce to $1,774. The yield on the 10-year Treasury note briefly touched a record low of 2.03 percent, after closing Monday at 2.34 percent.
An hour later with less than 45 minutes until the market closed, stocks rallied, gold retreated off its high and the yield on the 10-year Treasury note quickly headed higher. It was at 2.26 percent late Tuesday. A bond's yield drops when its price rises.
Howard Silverblatt, senior index analyst at S&P, called it the "Big Ben turnaround," referring to Fed chair Ben Bernanke.
The industries that did best on Tuesday were the ones that fell the most on Monday. Financial stocks in the S&P 500 rose 8.2 percent after falling 10 percent Monday. Materials companies, which rely on a stronger global economy for their profits, rose 5.9 percent.
Only seven of the 500 stocks in the index had declines. All 30 stocks in the Dow rose. Bank of America Corp., which was down more than 20 percent Monday, rose 16.7 percent, the most of any stock in the Dow. Aluminum maker Alcoa Inc. was up 8 percent.
Technology company MEMC Electronic Materials Inc. led the S&P 500 higher, gaining 19.1 percent.
Boosting the stock market isn't one of the Fed's jobs, but that hasn't stopped investors from parsing every word of the statements made by the Fed and Bernanke.
The Fed's mandate is to keep prices stable and promote low unemployment, not boost stocks. But a stock dive after Fed comments has happened before. On June 3, the stock market suffered a late-day dive when Bernanke spoke at a conference. Investors said they were looking for a hint of new plans to spur economic growth. When that didn't come, all three major indexes sank.
Read more: http://www.seattlepi.com/business/a...ts-on-Fed-statement-1786533.php#ixzz1Ua4gQ6Sw
Dow soars 429 points on Fed statement
NEW YORK (AP) — The Fed spoke — and financial markets rallied.
The Dow Jones industrial average surged more than 429 points, its tenth-highest point gain in history and the biggest since March 2009. It was just one day after the Dow had its worst point decline since 2008.
The Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013. The central bank also said that it has discussed "the range of policy tools" it can use to spur the economy.
Bob Doll, chief equity strategist at BlackRock, said the Fed's decision to hold interest rates at a very low rate for two years is "unprecedented" and called it a kind of "backdoor quantitative easing." In June, the central bank finished a second round of buying Treasury securities, also known as quantitative easing, in hopes of boosting the economy.
"Markets are going to do what they would have done if the Fed went out and bought securities," Doll said. He said he expects investors will return to stocks after the broad sell-off of the least few weeks.
He expects stocks to continue to rally because a slow-growing U.S. economy won't harm corporate profits. As a whole, the companies in the Standard & Poor's 500 index reap more than half their revenue overseas. What's more, companies have already cut costs significantly, have hoarded cash and squeezed more production out of workers. Even as the U.S. economy has slowed, the S&P 500 as a whole was expected to earn record profits this year.
"Corporate America has demonstrated that it can generate good growth and profits despite a weaker U.S. economy," Doll said.
The Dow rose 429.92 points, or 4 percent, to 11,239.77. On Monday, the Dow plunged 634.76 points in the first trading day after Standard & Poor's downgraded the U.S. one notch from its top AAA credit rating to AA+.
The S&P 500 rose 53.07, or 4.7 percent, to 1,172.53. The Nasdaq composite index rose 124.83, or 5.3 percent, to 2,482.52.
At first, markets reacted much differently to the Fed's statement. Stocks fell as much as 205 points after the Fed's 2:15 p.m. EDT statement.
Gold surged more than $50 per ounce to $1,774. The yield on the 10-year Treasury note briefly touched a record low of 2.03 percent, after closing Monday at 2.34 percent.
An hour later with less than 45 minutes until the market closed, stocks rallied, gold retreated off its high and the yield on the 10-year Treasury note quickly headed higher. It was at 2.26 percent late Tuesday. A bond's yield drops when its price rises.
Howard Silverblatt, senior index analyst at S&P, called it the "Big Ben turnaround," referring to Fed chair Ben Bernanke.
The industries that did best on Tuesday were the ones that fell the most on Monday. Financial stocks in the S&P 500 rose 8.2 percent after falling 10 percent Monday. Materials companies, which rely on a stronger global economy for their profits, rose 5.9 percent.
Only seven of the 500 stocks in the index had declines. All 30 stocks in the Dow rose. Bank of America Corp., which was down more than 20 percent Monday, rose 16.7 percent, the most of any stock in the Dow. Aluminum maker Alcoa Inc. was up 8 percent.
Technology company MEMC Electronic Materials Inc. led the S&P 500 higher, gaining 19.1 percent.
Boosting the stock market isn't one of the Fed's jobs, but that hasn't stopped investors from parsing every word of the statements made by the Fed and Bernanke.
The Fed's mandate is to keep prices stable and promote low unemployment, not boost stocks. But a stock dive after Fed comments has happened before. On June 3, the stock market suffered a late-day dive when Bernanke spoke at a conference. Investors said they were looking for a hint of new plans to spur economic growth. When that didn't come, all three major indexes sank.
Read more: http://www.seattlepi.com/business/a...ts-on-Fed-statement-1786533.php#ixzz1Ua4gQ6Sw
