U.S. STOCKS RISE ON SPECULATION FED WILL ACT
U.S. stocks rallied the most in almost a year, rebounding from yesterday’s rout that erased $1 trillion from the nation’s market value, on speculation the Federal Reserve will act to restore confidence in the markets.
U.S. Stocks Rise on Speculation Fed Will Act
Financial stocks led the gains in the S&P 500, rallying 4.5 percent as a group. Bank of America Corp. (BAC) and Citigroup Inc. (C) jumped at least 7.2 percent, after yesterday plunging more than 16 percent.Chevron Corp. (CVX) and Alcoa Inc. (AA) paced gains in energy and raw-material producers as commodities advanced. Pfizer Inc. (PFE), the world’s biggest drugmaker, gained 4.1 percent after being added to the “Conviction Buy” list at Goldman Sachs Group Inc.
Standard & Poor’s 500 Index added 2.6 percent to 1,148.75 at 10:37 a.m. in New York, the biggest intraday rally since Sept. 1. The benchmark gauge dropped 6.7 percent yesterday and traded at 12.3 times reported earnings, the lowest valuation since March 2009. TheDow Jones Industrial Average rose 218.80 points, or 2 percent, to 11,028.65 today.
“We’ve come down too far, too fast,” Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in a telephone interview. His firm oversees $550 billion. “We’re due for a bounce in stocks given how oversold we are. We believe the Fed will try to stabilize things and reiterate its strong commitment to do more if the situation warrants.”
U.S. stocks tumbled yesterday, dragging benchmark indexes to their biggest slump since December 2008, amid concern that a downgrade of the nation’s credit rating by S&P may worsen an economic slowdown. The S&P 500 slumped 11 percent in three days, the most since November 2008, and fell to the lowest since September. The S&P 500 has dropped 18 percent from this year’s high on April 29 through yesterday.
Treasuries Drop
Treasuries dropped, pushing 10-year note yields up from the lowest level since January 2009, on speculation the Fed officials may strengthen their commitment to record monetary stimulus as soon as today after a faltering economic recovery and a U.S. credit-rating cut provoked a rout in global stocks.
Chairman Ben S. Bernanke and his colleagues are weighing the use of more untested policy tools after two rounds of bond buying totaling $2.3 trillion failed to spur sufficient economic growth and reduce unemployment below 9 percent. The Federal Open Market Committee holds its regular meeting today in Washington following yesterday’s rout in global stocks. The FOMC plans to issue a statement at about 2:15 p.m. New York time.
Billionaire investor Wilbur Ross said he’s buying assets as the losses in global markets are being driven by fear rather than economic reality.
‘Rewarding Experience’
“Has the world really gotten 10, 12, 15 percent worse in the last 48 hours? I don’t think so,” Ross, who leads WL Ross & Co., said in an interview with Bloomberg Television. “Buying stocks at today’s prices over a couple of years’ time period will prove to be a uniquely rewarding experience.”
Bank of America, the largest U.S. lender by assets, gained 7.2 percent to $6.98, after erasing 20 percent yesterday. Citigroup added 12 percent to $31.34.
Chevron advanced 3 percent to $92.91, while Alcoa rose 5.5 percent to $11.95.
Pfizer rose 4.1 percent to $17.34. Goldman Sachs said it’s encouraged by management’s “commitment to delivering value to shareholders through announced spinoffs/divestitures and dividends/share buybacks.”
Losing Subscribers
AOL Inc. (AOL), the Internet company that purchased the Huffington Post in March, tumbled 14 percent to $13, its lowest level since its spinoff from Time Warner Inc. in 2009. AOL reported a second-quarter loss as rising global advertising sales failed to overcome the continuing decline in subscriptions to Web access.
Cablevision Systems Corp. (CVC) fell the most in the S&P 500, sliding 8.5 percent to $17.86. The fifth-largest U.S. cable provider reported profit that missed analysts’ estimates after subscribers defected to rivals or abandoned pay-TV amid a sluggish economy.
To contact the reporter on this story: Rita Nazareth in New York at [email protected]
To contact the editor responsible for this story: Michael P. Regan at [email protected]
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