Business

Stocks jump on hopes for Fed action

Stocks surged Tuesday as another bleak dose of economic data raised hopes that the Federal Reserve will take additional measures to stimulate the economy.

The Dow Jones Industrial Average rose 322.11 points, or three percent, to close at 11,176.76. The steep gains were disturbed momentarily by a magnitude 5.8-magnitude earthquake in Virginia. Tremors were felt on the East coast, through Washington, D.C., and up to New York City — but the earthquake failed to rattle investors, as stocks climbed in the final trading hour.

The Standard & Poor’s 500-stock index rose 38.53 points, or 3.4 percent, to 1,162.35, as energy, technology and consumer discretionary stocks registered the strongest gains. All 10 of the S&P 500’s sectors finished in positive territory. The technology-oriented Nasdaq Composite rallied 100.68 points, or 4.3 percent, to 2,446.06.

Another round of dismal economic reports prompted hopes that Federal Reserve Chairman Ben Bernanke will employ more accommodative measures to boost the economy. The Richmond Fed’s regional manufacturing survey showed sharply declining economic activity this month. New home sales also dropped for a third straight month and fell to the lowest level since February.

The downbeat reports have put more of an emphasis on Bernanke’s scheduled speech in Jackson Hole, Wyo., on Friday. Investors hope Bernanke will be more open to new easing measures, but at the same time are unclear as to what the central bank may have in store.

“There’s definitely a tint of optimism that he’ll pull a rabbit out of his hat,” said Michael Church, president of Addison Capital. “He did it last summer. My concern is the Fed wants to be careful that they’re not directly reacting to the stock market.”

Many analysts say the Fed does not have as much political support to announce a third full-fledged bond-buying program, commonly known as quantitative easing, or QE3.

“I scratch my head in thinking what Bernanke is going to do or say at this point,” said Maury Fertig, chief investment officer at Relative Value Partners. “I’m more concerned that if they put a QE3 in place, what if the market yawns? Then what?”

Traders said the earthquake on Tuesday was noticeable but did not have much of an impact on trading. Stocks initially pared gains right after the quake, but recovered quickly. “We felt it here,” said Jonathan Corpina, senior managing partner of NYSE floor broker Meridian Equity Partners. “It felt like there was a subway train going underneath the building. Everything was vibrating.”

He said everyone paused for about 20 seconds before it was “business as usual.”