Wall Street rocketed higher in the final trading session of what has been a tumultuous month as traders cheered a coordinated action by central banks to buttress money markets and a bounty of bullish economic data, pushing the Dow and S&P 500 above psychologically-important levels.
The Dow Jones Industrial Average soared 490 points, or 4.2%, to 12,046, the S&P 500 jumped 51.8 points, or 4.3%, to 1,247 and the Nasdaq Composite leaped 105 points, or 4.2%, to 2,620.
Stocks have made an abrupt shift into rally mode this week, following a steep multi-week selloff. Indeed, the Dow is now above the 12,000 mark, while the S&P 500 surpassed the 1,200 level.
The Dow’s performance on Wednesday was the seventh best since the blue-chip index was created in 1896 on a point basis, and the best on a percent basis since 2009. The rest of the month was choppy, but this week’s rally helped offset much of the earlier loss. For the month, the Dow rose 0.7%, the S&P 500 slipped 0.5% and the Nasdaq stumbled 2.4%.
On the day, every major sector was in the green, but energy, basic materials and financial firms saw the most buying. Additionally, roughly 98 of every 100 stocks on the broad S&P 500 ended the in the green along with every blue chip. More than 97% of volume on the New York Stock Exchange was in advancing shares, and volatility plunged 9.3%.
Out of the blue chips, Caterpillar (CAT: 97.88, +7.34, +8.11%), the world’s biggest heavy equipment maker, and JPMorgan Chase (JPM: 30.97, +2.41, +8.44%) were the top performers, closely followed by Alcoa (AA: 10.02, +0.71, +7.63%) and Bank of America (BAC: 5.44, +0.37, +7.30%). Wal-Mart (WMT: 58.90, +0.73, +1.25%) and Home Depot (HD: 39.22, +0.26, +0.67%) lagged behind with the shallowest gains.
Conversely, Home Depot (HD: 39.22, +0.26, +0.67%) was the best performing Dow component for the month, soaring 10%, while Bank of America (BAC: 5.44, +0.37, +7.30%) posted the worst performance, plunging 20%.
U.S. Treasury yields spiked as traders rushed out of the safe haven and into equity markets. The benchmark 10-year note yields 2.08% from 1.984%.
Central Banks Join Forces
While news from Europe has ruled the day in many prior sessions, central bank actions are shaking up world markets. The Federal Reserve, European Central Bank and four other central banks unveiled a coordinated action to provide liquidity to “ease strains in financial markets.”
“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the Fed said in a statement.
Essentially, the Fed reducing the cost of providing dollar funding to the other banks in exchange for their respective currencies to “improve liquidity conditions in global money markets,” according to the Fed’s website. The swaps are temporary, generally ranging from overnight to three months, and there is a binding agreement to reverse the transaction at a later point, according to the website.