U.S. stocks rose today on the hope that the Senate will pass a large economic stimulus package in response to a rapidly deteriorating labor market.
The Dow Jones industrial average closed up 217.52, or 2.7%, at 8,280.59; the S&P 500 rose 22.75, or 2.69%, closing at 868.60; and the Nasdaq composite was up 45.47, or 2.94%, to close at 1,591.71. All numbers are preliminary.
The Labor Department this morning announced that 598,000 payroll jobs were lost in January, or nearly 50,000 more than forecast, the biggest drop since December 1974. The unemployment rate also spiked up to 7.6% last month. Earlier this week, initial jobless claims were reported at 626,000, a level not seen since 1982, as a record 4.7 million Americans currently collect unemployment benefits.
The U.S. House already passed a $819 billion stimulus package, but the Senate has so far failed to reach an agreement.
Treasury Secretary Timothy Geithner is scheduled to unveil a financial sector aid package Monday that could include guarantees and purchases of illiquid debt securities.
The government could use the money to buy some bad assets, guarantee new loans or take more ownership of the banks, said Komal Sri-Kumar, chief global strategist at TCW Group Inc., Los Angeles.
The actions taken by President Barack Obamas administration could mark a turning point in the credit crisis that started in the spring of 2007.
As Obamas team works to up the ante on the stimulus package, implied systemic risk dropped dramatically across the globe. The CDX (credit default swap index) super senior tranche now represents one of the lowest allocations of risk we have seen since the credit crisis began, said Byron Douglass, senior research analyst at Credit Derivatives Research, a research firm.