U.S. stocks today staged a major rally, with the Dow Jones industrial average soaring almost 900 points near the close to end above the 9,000 mark, on hopes that the Federal Reserve will lower the benchmark federal funds rate by a half-point to 1% during its two-day meeting that starts today.
The Dow closed up 889.35, or 10.88%, at 9,065.12; the S&P 500 rose 91.58, or 10.79%, closing at 940.50; and the Nasdaq composite was up 143.57, or 9.53%, to close at 1,649.47. All numbers are preliminary.
Stocks showed resilience despite a report by the Conference Board of an all-time low of 38 in the consumer confidence index in October, a dramatic 23.4-point drop from 61.4 in September.
The confidence reading is at its weakest in history back to 1970, said chief economist Robert Brusca at New York consultancy FAO Economics.
The market also brushed off news that Standard & Poors reported its S&P/Case-Shiller home price indexes showed continued broad-based declines in the prices of existing single-family homes, with a 16.6% drop in August from a year earlier. Even so, the acceleration in price declines was only moderate compared with earlier in the year, according to S&P.
Bargain-hunters pushed the rally as valuations have fallen to 20-year lows, offsetting the selling pressure from hedge fund redemptions, which are starting to taper off from a torrid pace earlier this month.
A rebound in global equity markets started overnight, led by Hong Kongs Hang Seng index, which soared 14.3%. The gains, helped by some better-than-expected earnings reports, spilled into Europe and Wall Street.
Airline stocks benefited from slumping oil prices, with the light, sweet futures contracts for December delivery closing down $1.49 at $62.72 a barrel, or about 60% below its record high of $147.17 set on July 11. Oil prices have been falling on prospects of slower economic growth although the Organization of Petroleum Exporting Countries last week said it will cut production by 1.5 million barrels a day to shore up prices.
Also, demand for the Feds new commercial paper program to help corporations meet their short-term financing needs was slower than expected. Analysts said lower demand may signal less of a strain in the credit markets than previously feared as companies managed to raise funds from the private sector.