Stocks soared on Thursday as investors speculated the Federal Reserve will succeed in stoking economic growth through its second round of quantitative easing.
The Dow Jones industrial average ended the session up 219.71 points, or 1.96%, at 11,434.84; the S&P 500 ended up 23.09, or 1.93%, at 1,221.05; and the Nasdaq composite closed up 37.07, or 1.46%, at 2,577.34. All numbers are preliminary.
“This rally has a little different feel to it,” said Warren Koontz, chief investment officer for large-cap value stocks at Loomis Sayles, which oversees about $150 billion. “It might have more staying power than the ‘risk-on, risk-off’ trade. We have additional stimulus to the economy. The pendulum is swinging back to people being comfortable with the idea that we’re not going to see a double-dip (recession).”
The rally comes one day after the Federal Open Market Committee said the central bank will purchase as much as $600 billion of Treasury securities through June. Stocks also gained on Tuesday after midterm elections resulted in divided control of Congress, making it less likely lawmakers will pass any more major business reforms.
“It’s called the Bernanke put,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “The Fed wants to put a floor under the employment market and asset prices. You’re seeing that being reflected in both stock and commodities markets. Risk assets are attractive globally. From a fundamental standpoint, things may not be improving rapidly, but they are not deteriorating rapidly.”
Stock index futures extended gains before the start of trading Thursday as a measure of worker productivity increased at a 1.9% annual rate after falling 1.8% in the previous three months, Labor Department figures showed.