New York: US stocks rallied on 21 March, with the S&P 500 notching its biggest percentage gain in eight months, after investors viewed a statement from the Federal Reserve as signaling the central bank’s next move may be a cut in interest rates.
The gains helped the Standard & Poor’s 500 Index and the Nasdaq Composite Index turn positive year-to-date for the first time since a major market sell-off late last month spurred by declines in the Chinese stock market and turmoil in the subprime mortgage sector.
Rate-sensitive financial stocks were among Wednesday’s biggest gainers as yields of short-dated Treasuries fell below long maturities’ yields for the first time since August, returning the “yield curve” to an upward slope.
“This brings back a rate cut into the picture, and the (stock) market is very happy about that,” said Giri Cherukuri, head trader at OakBrook Investments LLC, which oversees $1.3 billion in Lisle, Illinois.
The Dow Jones industrial average ended up 159.42 points, or 1.3%, at 12,447.52. The S&P 500 Index finished up 24.10 points, or 1.71%, at 1,435.04. The Nasdaq index ended up 47.71 points, or 1.98 percent, at 2,455.92.
Shares of Morgan Stanley were already trading higher earlier in the session after the investment bank reported record earnings, but its stock piled on more gains following the Fed’s decision and accompanying statement.
Other financial shares jumped, including Citigroup Inc. and Bank of America Corp.
The Fed said it remained concerned about inflation but left out a reference to further “firming” of monetary policy -- or interest rate raises -- that had been in its previous statement.
The Fed voted unanimously to keep its benchmark federal funds rate unchanged at 5.25% while maintaining a warning on the risk of inflation.
Morgan Stanley shares ended up 6.9%, or $5.22, at $81.33. Citigroup stock gained 2.7%, or $1.39, to $52.03 and Bank of America shares rose 2.2%, or $1.10, to $51.86 on the New York Stock Exchange.
JPMorgan Chase & Co. was the top-weighted advancer on the Dow, adding 2.7%, or $1.30, to $49.05.
Adobe Systems Inc. and Oracle Corp. were among the top gainers on the Nasdaq after both software makers reported earnings that topped Wall Street estimates late on Tuesday.
Oracle shares climbed 3.5%, or 62 cents, to $18.17 and Adobe stock jumped 6.3%, or $2.56, to $43.30.
After the closing bell, shares of Motorola Inc. fell 5.8% following a profit warning from the mobile phone maker. Its stock was down at $17.66 in electronic trade after closing on the NYSE at $18.74.
Another disappointing note was sounded by FedEx Corp. Shares of the package delivery company dropped 1.2%, or $1.30, to $110.99 on the NYSE after it posted a lower quarterly profit and suggested a slowing economy may weigh on its future growth.
Trading was moderate on the NYSE, with about 1.63 billion shares changing hands, below last year’s estimated daily average of 1.84 billion. On Nasdaq, about 2.17 billion shares traded, above last year’s daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about nine to two on the NYSE and by 22 to 7 on Nasdaq.