The stock market rocketed away from the week’s doom and gloom with major stock indexes posting their biggest gains in five years – all on an unexpected intervention by Fed Chairman Ben Bernanke.
By the time the closing bell rang, exhausted but happy traders were celebrating a 47.28 point, or 3.7 percent, surge in the Standard & Poor’s 500-stock index, while the bellwether Dow Jones industrial average soared a whopping 416.66 points, or 3.55 percent, to hit 12,156.81. All but one of the 30 stocks in the Dow participated in the runaway rally.
Volume was heavy on the New York Stock Exchange, where about 1.95 billion shares changed hands. On the Nasdaq, about 2.45 billion shares traded.
Shares of Fannie Mae, the largest US mortgage finance company, advanced 11.1 percent to $22.00, and Citigroup the largest US bank, climbed 9.1 percent to $21.49.
On the Nasdaq, shares of Apple rose 6.4 percent to $127.35, leading gainers. Google’s shares climbed 6.3 percent to $439.84 as the company closed its $3.1 billion acquisition of DoubleClick.
“It was great to see green on my (trading) screen,” said John Forelli, a money manager with Independence Investments.
“We haven’t seen this for a while. Perhaps stocks are finally done hibernating for the winter?”
It does seem as if the stock market’s bears have stopped growling, at least for now. Even troubled financial stocks gained ground, with the sector as whole climbing 7.4 percent.
Bear Stearns, which was roiled by fresh rumors that the investment bank may be forced to file for Chapter 11 bankruptcy protection, slid to a 52-week low of $55.42 before rallying on news that Joseph Lewis, the second-largest shareholder, may add to his holdings, closing up 67 cents at $62.97.
“The market has been gripped by fear for a long time; now it seems that the Fed’s move has reminded folks that fear goes hand-in-hand with greed,” said Jim Paulsen, of Wells Capital Management.
Investors who had been wary about the risk involved in buying stocks or corporate bonds with solid fundamentals even in the wake of the painful sell-off in recent months, were suddenly reminded of the dangers of sitting on the sidelines for too long.
“This kind of reminded everyone that while they are worrying about a stock or bond getting hit and going down, it can equally easily bounce back up in this kind of volatile market, and they can miss their opportunity,” said Paulsen.
Until now, said Forelli, while investors have seen many stocks trading at deep discounts, the environment wasn’t right for them to consider taking the risk of buying. Yesterday, all that changed.