U.S. stocks rallied today and the Dow Jones industrial average zipped back above the 9,000 level on news that Federal Reserve Chairman Ben Bernanke supported fiscal stimulus to help the ailing U.S. economy.
The Dow Jones industrial average closed up 413.21, or 4.67%, at 9,265.43; the S&P 500 rose 44.85, or 4.77%, closing at 985.40; and the Nasdaq composite was up 58.74, or 3.43%, to close at 1,770.03. All numbers are preliminary.
“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate,” the Fed chief told the House Budget Committee in prepared remarks today.
Layoff announcements are picking up, as Internet company Yahoo Inc. warned it might reduce its staff of about 14,000 by 1,000 because of a drop in advertising revenue. Also, Merrill Lynch CEO John Thain told reporters thousands of jobs are likely to disappear in the investment bank’s takeover by Bank of America Corp.
The Conference Board today reported that the index of leading economic indicators rebounded by 0.3% in September, after falling 0.9% in August, largely the result of a jump in money supply as the government pumped fresh cash into the financial system. But the index of coincident indicators, which economists follow to predict future economic activity, fell 0.5% last month.
“The coincident index decline accelerated. This is all textbook recession,” said Robert Brusca, chief economist at New York consultancy FAO Economics. “More disturbing is the risk that it will line up with the more severe recessions, based on what current trends are showing us.”
Bank stocks rallied as Treasury Secretary Henry Paulson unveiled details of the government’s plan allowing U.S. depository institutions to apply for capital infusion in exchange for preferred shares.
Oil stocks, such as Exxon Mobil Corp., posted good gains in anticipation that leaders of the Organization of Petroleum Exporting Countries will decide to cut output when they meet on Oct. 24 in Vienna. On the New York Mercantile Exchange, the light sweet crude contract for November delivery gained $2.40 a barrel to close at $74.25, after closing on Friday at $71.85, less than half its all-time high of $147.27 on July 11
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