NEW YORK: Wall Street shares roared higher Tuesday a day after key indexes fell to 12-year lows, as investors shrugged off economic gloom ahead of a key speech from President Barack Obama.
The blue-chip Dow Jones Industrial Average vaulted 236.16 points (3.32 per cent) to close at 7,350.94, a day after sliding to its lowest level since 1997.
The tech-heavy Nasdaq composite leapt 54.11 points (3.90 per cent) to 1,441.83 and the Standard & Poor’s 500 broad-market index rallied off its 1997 lows with a gain of 29.81 points (4.01 per cent) to 773.14.
The rally gathered steam late in the day with no specific catalyst, but analysts said the market was ripe for a rebound after brutal selling in recent sessions.
“I think the market is anticipating some concrete details from Mr. Obama (on economic recovery plans) or maybe just a big pep rally. The mood has been very somber and we need some cheerleading.”
The market gave a muted response to Federal Reserve chairman Ben Bernanke’s comments that he sees a “reasonable prospect” for an end to the recession later this year if the numerous rescue and stimulus programs work as intended.
Bernanke also warned in his semiannual address to Congress that a full economic recovery could take two to three years or longer.
The market was able to look past data showing more steep declines in US home prices and a drop in consumer confidence to the lowest levels on record, suggesting the economy had not yet hit bottom.
The Conference Board said its consumer confidence index, an indicator of crucial consumer spending, plunged more than forecast to 25 this month, the lowest level since data began in 1967, from a January reading of 37.4.
A separate report Tuesday by Standard & Poor’s/Case-Shiller showed home prices in top US cities fell a record 18.5 per cent in December amid the unending mortgage crisis.
Joel Naroff at Naroff Economic Advisors said investors were able to come away with some optimism despite the gloomy picture.
“Mr. Bernanke did express some hopes that the economy could start recovering by year’s end,” he said.
“President Obama will likely make the case that his plans may take time to work but they will work. I believe he is right but he still has to sell it.”
Al Goldman, strategist at Wachovia Securities, said the market also drew “some reassurance” from comments from Sheila Bair, who heads the Federal Deposit Insurance Corp, which oversees the banking sector.
“She said large banks are currently adequately capitalised, and it would be surprising if the government was forced to nationalise them,” Goldman said.
Some of the biggest gains came in the battered finance sector, with Citigroup surging 21.50 percent to 2.60 dollars following heavy losses last week. - AFP
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