New York: US stocks rose more than 3% on Tuesday to snap back from 12-year lows, after Federal Reserve chairman Ben Bernanke delivered a big dose of relief when he signaled that nationalization of big banks was not at hand.
Bernanke said the significant value built up in the country’s banks would be lost if they were government-owned, easing investor fears that shareholders would be wiped out if the banks were taken over.
In testimony to the US Senate Banking Committee, Bernanke added that although there could be a time when it is necessary to close banks down, now is not the time.
Bank stocks surged a day after reports that the United States was on the brink of taking a large common stock stake in Citigroup Inc. Citigroup on Tuesday jumped 21.5% to $2.60. Bank of America climbed 21% to $4.73 and the S&P Financial index surged 11.4%.
“Bernanke’s comments lifted spirits,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. “A real fear that investors have had is that the public sector has become far too involved in the private sector.”
The Dow Jones industrial average rose 235.76 points, or 3.31%, to 7,350.54. The Standard & Poor’s 500 Index gained 29.69 points, or 3.99%, to 773.02. The Nasdaq Composite Index added 54.11 points, or 3.90%, to 1,441.83.
The Dow had its biggest point and percentage gain on Tuesday since 21 January but remains down 8.1% for the month and 16.2% year-to-date.
The gains snapped a six-day losing streak for the S&P 500.
Concern about the future of the US banking system had dragged the Dow and the S&P 500 to 1997 lows on Monday.
Stocks rose across all sectors on Tuesday, with Microsoft the only decliner among the 30 components of the Dow industrials.
Shares of Home Depot rose over 10% to $20.67, after the leading home improvement chain’s quarterly operating profit topped estimates.
Exxon Mobil Corp and Chevron were the top boosts to the Dow as crude oil futures rose nearly 4%. Exxon gained 4% to $72.09 and Chevron added 3.7% to $65.28. The price of crude rose amid expectations that Opec’s oil supply will fall as the group’s members enforce a deal to cut output, increasing its scope to lower production further at a 15 March meeting.
The S&P energy index gained 4.7%.
Investors also snapped up bargains in the technology sector. Apple Inc rose 3.8% and Google Inc gained 4.7%.
Shares of Microsoft, however, edged down 0.2 percent to $17.17 after the software maker said at an analysts’ meeting there are no plans to accelerate cost cuts.
Despite Tuesday’s advance, US stocks are at about half their market value from peaks reached in October 2007.
Advancing stocks outnumbered declining ones on the NYSE by almost 6 to 1 while advancers beat decliners on the Nasdaq by about 3 to 1.