NEW YORK: US stocks rallied on Tuesday ahead of a decision from the Federal Reserve policy meeting expected to conclude with an interest-rate cut of as much as 1 percentage point. Stronger-than-expected earnings from Goldman Sachs Group and Lehman Brothers Holdings also drove the financial sector higher.
The Dow Jones industrial average jumped 256.53 points, or 2.14%, to 12,228.78 and the Standard & Poor’s 500 Index rose 32.23 points, or 2.60%, to 1,309.83. The Nasdaq Composite Index gained 49.37 points, or 2.27%, to 2,226.38. Bear Stearns stock surged more than 65% on Tuesday, as investors bet a new bidder could emerge for the investment bank that agreed to be bought by JPMorgan Chase.
European stocks jumped more than 3% on Tuesday as hopes for a steep US rate cut and above-forecast results from Goldman Sachs and Lehman Brothers provided some relief to battered financials. The FTSEurofirst 300 index unofficially closed up 3.4% at 1,240.3 points but this was not enough to recoup all of the previous day’s 4.4%-loss. The rebound was led by recently battered banking shares, with UBS —a major victim of the credit crunch —rallying more than 14% and HSBC jumping more than 7%.
Britain’s FTSE 100 surged 2.6% by midday on Tuesday as hopes of a chunky US rate cut lifted shares and helped banks rebound from steep falls on Monday after the Bear Stearns firesale. At 1202 GMT, the blue-chip index was 142.8 points higher at 5,557.2 after the FTSE 100 hit its lowest closing level since late 2005 on Monday. UK banking and financials benefited most from the positive sentiment, accounting for over 42 index points.
Nikkei average was up 1.5% or 176.65 points to end at 11,964.16. The Hang Seng Index rose more than 1% in early trade only to hit fresh 7-month lows, which was followed by more swings in and out of positive territory. It closed up 1.4%, or 300 points, to end at 21,384.61, having earlier hit its lowest mark this year.
