NEW YORK — Wall Street staged its biggest rally in five years Tuesday as investors cheered the latest move by the Federal Reserve to shore up the nation’s shaky financial system.
The Dow Jones industrial average rocketed 416.66 points, or 3.6 percent, to 12,156.81, while the Standard & Poor’s 500 index jumped 3.7 percent to 1,320.65. The percentage gains were the biggest one-day advances for the market benchmarks since the early days of the U.S. invasion of Iraq in March 2003, according to CNBC.
The tech-heavy Nasdaq climbed 4 percent to 2,255.76.
The rally followed the Fed’s surprise announcement that it would lend up to $200 billion to banks and other financial institutions and would accept troubled debt, including slumping mortgage-backed securities, as collateral. The move makes it less likely that bad debt related to the meltdown in the housing industry will sink a major bank or Wall Street firm, analysts said.
Moreover, the Fed is moving in concert with central banks in Canada and Europe, which pledged to inject up to $45 billion into their financial systems.
“This is the formula that investors have been waiting for,” said strategist A.C. Moore with Dunvegan Associates in Santa Barbara, Calif.
The advance came on heavy volume and was broad-based.
The coordination with Europe helped strengthen the dollar, which rose Tuesday against the euro and the yen. The greenback had fallen to record lows against the euro in recent months as the Fed cut rates to bolster the struggling U.S. economy while European bankers held rates steady.
The slipping dollar has helped push oil prices to record levels because crude is priced in the U.S. currency. That contributed to inflation worries.
Dow’s rebound
Tuesday’s jump by the Dow Jones industrial average was the fourth-largest single-day gain for the bellwether stock index, after three straight losing sessions. Where it ranks among the biggest one-day climbs of all-time:
Date Close Change Pct
March 16, 2000 10,630.60 499.19 4.93%
July 24, 2002 8,191.29 488.95 6.35%
July 29, 2002 8,711.88 447.49 5.41%
Date Close Change Pct
Tuesday 12,156.81 416.66 3.55%
April 5, 2001 9,918.05 402.63 4.23%
April 18, 2001 10,615.83 399.10 3.91%
Date Close Change Pct
Sept. 8, 1998 8,020.78 380.53 4.98%
Oct. 15, 2002 8,255.68 378.28 4.80%
Sept. 24, 2001 8,603.86 368.05 4.47%
