U.S. stocks rose today as Lehman Brothers Holdings Inc. lifted the financial sector amid talk of a takeover, while Federal Reserve Chairman Ben Bernanke indicated that no U.S. interest rate hike is on the horizon.
The Dow Jones industrial average closed up 197.85, or 1.73%, at 11,628.06; the S&P 500 rose 14.47, or 1.13%, closing at 1,292.19; and the Nasdaq composite was up 34.33, or 1.44%, to close at 2,414.71. All numbers are preliminary.
Lehman shares were up 5% in late trading on a possible takeover by state-owned Korea Development Bank. This helped push the financial select sector ETF up 3.3%, while Morgan Stanley gained 5% on market sentiment that the firms outlook is strong compared to its peers.
The rate-sensitive financial sector was also helped by Mr. Bernankes comments at an annual monetary policy conference. In prepared remarks, the Feds chief acknowledged facing one of the most challenging economic and policy environments in memory.
Bernanke seems to get it, said David Rosenberg, chief North American economist at Merrill Lynch, in a research note. He admits that the 325-basis-point cut in rates has only in part offset the economic drag from the tightening from the credit crunch.
Oil also plunged. The light sweet crude oil contract for October delivery fell $6.59, or 5.4%, to $114.59 a barrel on the New York Mercantile Exchange, the largest one-day dollar drop since January 1991.