NEW YORK — A week that began ominously with the Federal Reserve taking extraordinary steps to prop up the global financial system ended on an upbeat note Thursday as battered financial stocks rallied on hope that the central bank’s actions will work.
Commodity prices tumbled Thursday for a second day, and the dollar strengthened. Those moves could ease inflationary pressures and give the central bank wiggle room to keep cutting interest rates to stave off a recession.
The Dow Jones industrial average rose 261.66 points, or 2.2 percent, to 12,361.32. With the market closed for Good Friday, the index ended up 3.4 percent for the week, its best showing in more than a month.
The Standard & Poor’s 500 climbed 31.09 points, or 2.4 percent, to 1,329.51. It was up 3.2 percent for the week. The Nasdaq composite index moved ahead 48.15 points, or 2.2 percent, to 2,258.11. It advanced 2.1 percent for the week.
Commodity prices tumbled across the board. Crude oil eased to $101.42 a barrel for the week. Only days after topping $1,000 an ounce, gold tumbled $25.40 to $924.30. Wheat prices fell more than 8 percent, and silver prices descended almost 9 percent.
Thursday’s bright spot was the financial sector as the S&P 500 financial index shot up 7 percent. Citigroup jumped 10 percent.
Merrill Lynch surged 13 percent despite an analyst’s prediction that the brokerage might have to take $8 billion in first-quarter write-downs of mortgage-related holdings and other assets.
Giving the sector a boost was an announcement by the Fed that it will accept a wider array of assets as collateral from investment banks seeking loans, which the market interpreted as another sign that the central bank is committed to stabilizing Wall Street.
“The Fed is determined to avoid a financial disaster,” said Robert Bissell, president of Wells Capital Management in Los Angeles.
Investors believe that “the Fed is taking a series of steps that are starting to take hold.” No investment banks had credit problems this week on the scale of those at Bear Stearns, which Sunday said it would sell itself at a bargain-basement price to JPMorgan Chase.
Mortgage rates also eased last week. That decline, if sustained, could lift the housing market and the broader economy. The average rate for 30-year fixed mortgages fell to 5.87 percent from 6.13 percent last week, Freddie Mac said.
In the wake of the Fed’s actions, it’s a good time to buy bank stocks, Richard X. Bove, an analyst at Punk Ziegel & Co., wrote in a report. “The last time an opportunity of this nature existed to buy bank stocks this cheap was in 1990,” Bove wrote. “The next time will be in 20 years. This is a once-in-a-generation opportunity.”
But experts noted that the market still hasn’t been able to string several up days. Last week, the Dow surged 420 points Tuesday and fell 293 points Wednesday before reclaiming most of that loss Thursday.
