NEW YORK, October 20 – US stocks rallied Monday on signs of easing credit and after Federal Reserve chief Ben Bernanke threw his support behind another stimulus package to kick-start the economy.
The Dow Jones Industrial Average leapt 127.04 points (1.44 percent) to 8,979.26 around 1502 GMT.
The Nasdaq composite edged up 3.51 points (0.21 percent) to 1,714.80 and the broad Standard & Poor\’s 500 index climbed 12.80 points (1.36 percent) to 953.35.
Analysts said sentiment was boosted after the United States and the European Union decided over the weekend to hold a series of summits to strengthen the international financial system, with the first meeting expected next month.
But they said investors remained cautious about the impact of the global credit crunch, which was showing early signs of easing.
"There isn\’t much rhyme or reason for the upward bias, other than the hopeful sense that the market is near a bottom and that all of the government action will succeed in easing the stresses in the credit market," said Patrick O\’Hare, analyst at Briefing.com.
"The attention continues to fall on the financial dealings and the behavior of the market itself, which has been as unruly as ever in terms of its trading demeanor," he said.
Wall Street, which bounced higher at the market open, gained another shot of confidence from Fed chairman Bernanke\’s testimony before the House of Representatives Budget Committee.
"With the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," he told lawmakers.
Bernanke gave no firm hint of further interest rate cuts to help the economy. On October 8, the Fed slashed its interest rates by 0.50 percentage points in a coordinated move with other major central banks.
The key federal funds rate is currently pegged at 1.5 percent. The Federal Open Market Committee holds its next rate-setting meeting on October 28-29.
In another market positive, the Conference Board reported its composite index of leading economic indicators, covering the coming six months, edged up 0.3 percent in September, the first increase in the last five months.
Among stocks in focus, toy maker Mattel fell 3.81 percent to 13.90 dollars after reporting third-quarter results that disappointed the market. Analysts expect a grim Christmas shopping season as consumers, scared about recession, curb spending.
Halliburton, the petroleum services firm, swung into the red in the third quarter, mainly due to hurricanes in the Gulf of Mexico, but offered positive guidance. Shares rose 11.01 percent to 20.27 dollars.
Yahoo fell 2.25 percent to 12.61 dollars after The Wall Street Journal reported the troubled Internet firm will announce significant cost cuts, including layoffs, possibly as early as Tuesday when it announces third-quarter results.
On Friday, the Dow shed 1.41 percent, capping a see-saw week saw the blue-chip index gain 4.7 percent after a horrific 18 percent meltdown the prior week.
Bonds were mixed. The yield on the 10-year US Treasury bond held steady at 3.396 percent, compared with 3.938 percent Friday, and that on the 30-year bond rose to 4.324 percent from 4.312 percent. Bond yields and prices move in opposite directions.
