| |
NEW YORK: Wall Street broke out the champagne on Monday after governments took massive steps to unlock frozen credit markets, driving the Dow into its biggest rally in 75 years.
US stocks soared more than 11 percent in a powerful rally that accelerated in the final half hour as investors cheered worldwide emergency measures to combat the global financial crisis and shore up battered confidence.
The Dow Jones Industrial Average jumped 936.42 points or 11.08 percent to 9,387.61, breaking an eight-session losing streak.
It was the blue-chip Dow's biggest point gain on record and its sharpest percentage rise since 1933 during the worst days of the Great Depression.
Last week the Dow fell 18 percent in its steepest one-week decline, as markets around the world dipped on fears that financial turmoil was spinning out of control and could trigger a global recession.
The tech-heavy Nasdaq jumped 194.74 points (11.81 percent) to close at 1,844.25 and the broad Standard & Poor's 500 index advanced a whopping 104.13 points (11.58 percent) to 1,003.35.
Analysts said the S&P 500 percent gain was also its largest in 69 years.
Wall Street opened sharply higher, joining in global market euphoria as investors celebrated the prospect of taming the financial crisis and getting credit - the lifeblood of economies - flowing again.
Governments pumped hundreds of billions of extra dollars into banks crippled by the credit crunch.
In three days of negotiations that ended on Sunday, the Group of Seven advanced economies, the International Monetary Fund and the Group of 20 rich and emerging countries agreed to coordinate their battle plans to tackle the crisis.
Investor sentiment got a further boost after the leaders of the 15-country eurozone, following the lead of Europe's financial giant Britain, agreed on Sunday on a high-stakes joint bid to pull the world financial system back from the brink of collapse.
"The main message from the weekend meetings is that governments the world over seem to get the severity of the financial crisis now and are intent on taking extreme measures to improve matters," said analyst Patrick O'Hare.
"For now, things are moving in the right direction, both on the credit market and stock market fronts," he said.
The US Treasury announced on Monday it was gearing up to buy stakes in a "broad array" of financial firms and would hold a meeting later in the day with leading bankers and the Federal Reserve to discuss a financial market stabilisation initiative.
"We said the markets needed 'shock and awe' tactics and the steps that have been taken so far are very significant. If markets (were to) continue to melt down, we would not be surprised by a global guarantee of interbank lending," John Ryding and Conrad DeQuadros at RDQ Economics wrote in a client note.
"The US is expected to outline a comprehensive plan of its own as soon as Tuesday and is likely to include interbank lending and bank debt guarantees, and direct capital injections in financial institutions," they said.
Surging financial shares got an extra boost of confidence from Morgan Stanley completing its cash injection from a Japanese bank.
Morgan Stanley skyrocketed 86.98 percent to 18.10 dollars after announcing that Mitsubishi UFJ Financial Group, Japan's largest financial group, was taking a 21 percent stake for 9.0 billion dollars.
Last week, rumours that the Japanese group would pull out of the deal, first announced in September, sent shares in Morgan Stanley into a tailspin and raised fear of another high-profile Wall Street collapse.
The Federal Reserve gave the green light for the takeover of Wachovia bank by rival Wells Fargo in a merger that would create the largest US bank in terms of deposits.
Wachovia climbed 13.59 percent to 5.85 dollars and Wells Fargo rose 7.38 percent to 30.40 dollars.
Sovereign Bancorp dropped 3.41 percent to 3.68 dollars despite Spain's biggest bank, Santander, saying it was in talks to acquire full control of the US lender, in which it already holds a 25 percent stake.
Energy stocks, which had been hammered last week, got a lift from a rebound in commodities prices.
ExxonMobil, the Dow's biggest component, powered 17.19 percent higher to 73.08 dollars and aluminium giant Alcoa shot up 22.84 percent to 13.82 dollars.
Banks and the bond market were closed for a public holiday.
On Friday, the yield on the 10-year US Treasury bond increased to 3.861 percent from 3.834 percent on Thursday while that on the 30-year bond edged up to 4.137 percent against 4.120 percent. Bond yields and prices move in opposite directions.
"Investors will have a clearer picture of how credit markets will react to the measures on Tuesday when banks and the Treasury markets reopen," the Briefing.com analysts said. - AFP/de
|
