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Wall Street surges on rate cut hopes
NEW YORK
Petroleumworld.com 11 29 07
Wall Street shares rallied sharply for a second straight day as sentiment was buoyed by a slide in crude oil prices and renewed hopes for a Federal Reserve interest rate cut next month.
The Dow Jones Industrial Average leapt 331.01 points (2.55 percent) to close at 13,289.45 a day after a 215-point rally in the blue-chip index.
The tech-heavy Nasdaq composite surged 82.11 points (3.18 percent) to 2,662.91 and the broad-market Standard & Poor's 500 index advanced 40.79 points (2.86 percent) to 1,469.02.
The market got a boost from comments by Fed vice chairman Donald Kohn, who said the central bank must be "nimble" in policy and "should not hold the economy hostage" to teach a lesson to financial market speculators.
The comments lifted hopes the Fed may cut rates at its next meeting.
Kohn "took up a strikingly different stance toward a potential interest-rate cut than the hawks that have been circling monetary policy recently," said Joseph Hargett at Schaeffer's Investment Research.
As a result, Hargett said the market was "bolstered by the prospects of another Fed rate cut at the Federal Open Market Committee's December meeting."
The rally gained steam after the Fed issued its Beige Book report, which suggested the economy is still growing but at a slow pace -- reinforcing the notion that the central bank may trim rates again.
BMO Capital Markets economist Jennifer Lee said, "There isn't anything in today's Beige Book that would prevent the Fed from easing at the December 11 meeting."
Sentiment also was helped by a further retreat in crude oil prices. New York's main contract, light sweet crude for January delivery, closed down 3.80 dollars at 90.62 dollars a barrel.
It was the second straight rally for Wall Street, which got a lift Tuesday after a big investment in troubled banking giant Citigroup by Abu Dhabi investors helped boost confidence.
The market shrugged off news Wednesday that US existing-home sales fell 1.2 percent in October and prices plunged in a sign of more woes for the US housing sector.
Dick Green at Briefing.com said the market appears to be handling negative news well, suggesting the worst of the correction may be over.
"We aren't saying the market is out of the woods," he said early in the day. "But the market showed good resilience during trading yesterday and action this morning is encouraging."
The battered finance sector led the gainers: Citigroup jumped 6.5 percent to 32.29 and Merrill Lynch rallied 8.9 percent to 57.79. Wells Fargo added 3.0 percent to 30.72 despite announcing it would have to set aside 1.4 billion dollars to cover soured mortgage loans.
Bonds drifted lower on a shift into equities. The yield on the 10-year US Treasury bond rose to 4.025 percent from 3.944 percent Tuesday and that on the 30-year bond increased to 4.407 percent from 4.355 percent. Bond yields and prices move in opposite directions.
Story from AFP 28 2152 GMT 11 07
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