The markets capped a violent trading session with a sharp comeback as traders scooped up beaten-down stocks and analyzed the Federal Reserve’s pledge to hold interest rates at historically-low levels for the next two years. Hit the jump to read the rest of the story.
Funk Flex
Today’s Markets
The Dow Jones Industrial Average jumped 430 points, or 4%, to 11,230, the S&P 500 rose 53.1 points, or 4.7%, to 1,173 and the Nasdaq Composite climbed 125 points, or 5.3%, to 2,483. The FOX 50 gained 35.9 points, or 4.4%, to 850.
The markets moved dramatically throughout the day, with the blue chips making a 627 point move from the highs and lows of the session. Whereas 99% of the volume on the New York Stock Exchange was in declining stocks in the prior session, 75% was in advancing stocks on Tuesday.
Financials, which took the biggest fall in the prior session, were among the biggest gainers on Tuesday. In particular, large banks like Bank of America (BAC: 7.60, +1.09, +16.74%), Citigroup (C: 31.82, +3.87, +13.85%) and JPMorgan Chase (JPM: 36.40, +2.34, +6.87%) were sharply higher.
Big-name technology companies like Apple (AAPL: 374.01, +20.80, +5.89%), Google (GOOG: 573.41, +27.39, +5.02%) and Ebay (EBAY: 30.16, +3.21, +11.91%) sent the technology-heavy Nasdaq zipping close to 3%.Even energy companies like ExxonMobil (XOM: 71.64, +1.45, +2.07%) and Chevron (CVX: 93.40, +3.15, +3.49%) that were beaten down earlier in the session made a comeback.
Still, Wall Street had a long way to go to reverse the massive 13% retreat the benchmark S&P 500 has made since July.
The Federal Reserve said Tuesday downside risks to the economy have increased since its last meeting, and plans to hold interest rates at extraordinarily low levels until 2013. The central bank also said it is prepared to take additional action to prop up the economy.
The decision saw three dissents among the ten voting members of the Federal Open Market Committee, which has only happened a handful of times in history, according to analysts that watch the Fed.
While the move wasn’t entirely unexpected, the specific timeframe to start hiking rates launched Treasury bond prices higher, pushing yield lower.
Gold continued on its meteoric rise, closing at yet another record high. The precious metal jumped $29.80, or 1.7%, to $1,743 a troy ounce.
Productivity fell by a less-than-expected 0.3% in the second quarter of this year, compared with expectations of a 0.8% fall, according to the Labor Department. Labor costs, meanwhile, climbed 2.2%, a slightly smaller increase than the 2.3% economists were expecting.
While the productivity and labor costs report generally yields little market reaction, it may present an important tidbit of data on inflation for the Fed, which needs to balance growth, with inflationary concerns.
“Unit labor costs are a very important determinant for inflationary pressures in the economy,” wrote Daniel Greenhaus, chief global strategist at BTIG. “If consumers see price increases of a significant amount, they will demand more from employers who, in response to paying more for labor, raise prices.”
Economists were also mulling a bout of data from China. Inflation on the producer and consumer level picked up in July. Industrial production in China also slowed considerably during the month, another sign of weakness there. Increasing prices coupled with slower economic expansion presents a “hurdle” for the country’s central bank, according to economists at Nomura.
FX
