U.S. stocks rallied, with benchmark indexes poised for their biggest advance in more than a year, after European policymakers announced a loan package of almost $1 trillion to contain the sovereign-debt crisis.
The Dow Jones industrial average closed up 404.71, or 3.9%, at 10,785.14; the S&P 500 rose 48.85, or 4.4%, closing at 1,159.73; and the Nasdaq composite was up 109.03, or 4.81 %, to close at 2,374.67. All numbers are preliminary.
The VIX, the benchmark for U.S. stock options, tumbled 26% to 30.35 and lost as much as 37%, the biggest intraday drop in its two-decade history.
“This takes the panic out of the market,” said Paul Zemsky, head of asset allocation for ING Investment Management, which oversees $550 billion. “We expect investors to hopefully focus on U.S. economic fundamentals, which have been pretty good. Our forecast is for somewhere between 1,250 and 1,300 on the S&P 500 by year-end.”
The S&P 500’s advance followed an 8.7% slide since April 23 and the biggest weekly retreat since the start of the bull market in March 2009 as concern grew that European leaders weren’t doing enough to halt a government debt crisis.
Jolted into action by last week’s drop in the euro to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro nations agreed to offer financial assistance valued at almost $1 trillion to countries struggling to finance budget deficits. The European Central Bank will counter what it called “severe tensions” in “certain” markets by purchasing government and private debt.
The Stoxx Europe 600 index surged 7.2%, the biggest rally since November 2008, after European stocks plunged the most in 18 months last week. The S&P 500 intraday came within 3 points of erasing losses from the May 6-7 rout before easing off its highs.
Moody’s Corp. declined 7.8% in late-session trading after it disclosed that it received a Wells notice from the SEC concerning an investigation of the firm’s credit-rating policies.