Stocks surged Thursday, with the Dow Jones Industrial Average closing above where it stood just ahead of the collapse of Lehman Brothers, with investors around the globe embracing the Federal Reserve’s $600 billion plan to stoke the economy.
“It seems like the reflation trade is back in full force,” said Jack Ablin, chief investment strategist at Harris Private Bank, about investor bets that the global economy would rebound.
The Dow Jones Industrial Average gained 219.71 points, or 2 percent, to 11,434.84, its highest close since the days before Lehman Brothers collapsed in September 2008. The Dow fell 504 points on September 15, 2008, the day of Lehman’s bankruptcy filing.
Peter Boockvar, equity strategist at Miller Tabak, downplayed the significance, saying it would be an apt point of comparison “if the Fed wasn’t printing enormous amounts of money in a blatant debasement of the U.S. dollar.”
Bank of America and JPMorgan Chase extended their gains after The Wall Street Journal reported the Fed is expected to soon let healthy banks with robust capital levels increase dividend payments.
The S&P 500 Index added 23.1 points, or 1.9 percent, to 1,221.06, with financials the best performer among its 10 industry groups.
The Nasdaq Composite rose 37.07 points, or 1.5 percent, to 2,577.34
The Fed’s plan to buy $600 billion in bonds in an effort to drive down interest rates and induce more lending helped bolster optimism that the global economy would not worsen and corporate profits would increase.
In an editorial in Thursday’s Washington Post, Fed Chairman Ben Bernanke defended the central bank’s decision and reiterated that the Fed can’t on its own resolve all of the country’s economic troubles, saying efforts are also needed by other entities, including Congress and regulators.
“Bernanke is once again waving his arms in the air saying ‘hey guys! How about some help over here?’ Unfortunately, nobody in Congress seems to be listening,” wrote Dan Greenhaus, chief economic strategist at Miller Tabak.
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