US stocks posted their biggest percentage gains of the year Wednesday as investors read remarks by central bankers in Europe and the US as a signal that more monetary stimulus may be on the way.
The Dow Jones Industrial Average jumped 286.84 points, or 2.4 percent, to 12,414.79, and the euro rose one percent to trade well above $1.25. The Dow’s gain comes one day after the blue-chip index snapped a four-day losing streak, putting it back in positive territory for the year. The benchmark hadn’t seen back-to-back gains since late April. Bank of America climbed 7.6 percent, its best performance since January, while United Technologies jumped 3.9 percent.
The Standard & Poor’s 500-stock index rose 29.63 points, or 2.3 percent, to 1,315.13 and the Nasdaq Composite climbed 66.61 points, or 2.4 percent, to 2,844.72. The Dow and S&P 500 percentage increases were the biggest since December, while the Nasdaq’s was the largest in more than two weeks.
The gains came as European Central Bank President Mario Draghi said markets were underestimating political leaders’ commitment to addressing the euro crisis. That suggested to some investors that the ECB would be prepared to act once that happened. Draghi said that “a few” members of the ECB’s rate-setting committee were in favor of a rate cut.
In the US Wednesday, Atlanta Fed president Dennis Lockhart said that “further monetary actions to support the recovery will certainly need to be considered” if modest domestic growth is no longer realistic. “The situation we face requires that the [Fed’s rate-setting committee] maintain a state of readiness to respond to financial or economic instability should the need arise,” he said. Those remarks came after The Wall Street Journal reported that “a shift at the Federal Reserve [was] putting back on the table the possibility of action to spur the recovery.”
The Fed’s Beige Book report on economic conditions across its 12 districts showed that the economy continued to expand at a moderate pace. On Thursday, Fed chairman Ben Bernanke will appear before Congress. That comes ahead of the Fed’s next rate-setting meeting on June 19 and 20.