New York – Stocks rebounded sharply Wednesday as investors, growing more optimistic about chances for an interest-rate cut, sought bargains after the previous session’s tumble. The Dow Jones industrials gained almost 250 points.
Many investors believe the Federal Reserve will cut interest rates at its next meeting Sept. 18 or sooner and were preparing for Fed Chairman Ben Bernanke to hint at such a move Friday at a speech in Jackson Hole, Wyo. That possibility has given Wall Street some hope that the stock market will recover from its summer volatility and that right now it’s a good strategy to buy while the buying is cheap.
The market’s gain was padded by news that Bernanke said in a letter to Sen. Charles Schumer, D-N.Y., that Fed policymakers are “prepared to act as needed” if the market’s turbulence hurts the economy.
The Fed, although it has not indicated that it will lower the benchmark fed funds rate, has been adding cash to the banking system in an attempt to keep the credit markets liquid.
A jump in oil prices fed a rally in energy-company stocks, and positive news from technology companies including Seagate Technology gave that sector a boost. Meanwhile, Altria Group Inc. spun off its Philip Morris International cigarette business.
The Dow rose 247.44, or 1.90 percent, to 13,289.29, near its highs of the session. The blue- chip index tumbled 280 points Tuesday amid pessimism about the Fed’s intentions.
Broader stock indicators also jumped.
The Standard & Poor’s 500 index added 31.40, or 2.19 percent, to 1,463.76, while the Nasdaq composite index gained 62.52, or 2.50 percent, to 2,563.16.
The dollar fell against other major currencies except the yen. Gold prices rose.
