NEW YORK — A plan to revive Europe’s sagging economy rippled through the financial world Thursday, setting off a rally in the U.S. stock market that wiped out its losses for the year.
The pledge by the European Central Bank to spend 1.1 trillion euros on bonds knocked down government borrowing rates across Europe and drove the euro to its lowest level against the dollar in 11 years. For investors, the long wait for action in Europe was over.
“It’s all about the ECB today,” said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management. “This is a very positive development. They have a reputation of overpromising and underdelivering, and today they delivered.”
The Standard & Poor’s 500 index jumped 31.03 points, or 1.5 percent, to close at 2,063.15. That nudged it into positive territory for the year, up 0.2 percent.
The Dow Jones industrial average climbed 259.70 points, or 1.5 percent, to 17,813.98, while the Nasdaq climbed 82.98 points, or 1.8 percent, to 4,750.40.
The ECB announced Thursday that it would start buying 60 billion euros of government and private bonds every month, slightly more than what many in the markets anticipated.
The ECB said the program will run 18 months, from this March until September 2016, but it left open the option of extending the program.
That wiggle room is crucial, said Joseph Quinlan, chief market strategist at U.S. Trust. Turning around an economy often takes longer than people think.
“The biggest positive is that it appears to be open-ended,” Quinlan said. “As we learned in the U.S., it takes time for this to work.”
Major markets in Europe ended the day with solid gains. Germany’s DAX rose 1.3 percent, and France’s CAC-40 gained 1.5 percent. Britain’s FTSE 100 picked up 1 percent.
“It’s hard not to see this as a positive, but there will be lingering doubts,” Chris Rupkey, chief financial economist at the Bank of Tokyo, said in a note to clients. “Is there even enough debt for them to buy?”
The euro fell farther against the U.S. dollar Thursday, reaching $1.13. The euro hasn’t been that cheap since September 2003, according to FactSet data. A weakened euro makes European goods cheaper, which could help boost exports from the region and lift inflation from dangerously low levels.
