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Dow surges as investors optimistic about rate cut

Dow surges as investors optimistic about rate cut

Stocks rebounded sharply Wednesday as investors, growing more optimistic about chances for an interest rate cut, sought bargains after the previous session's huge tumble.
Many investors believe the Federal Reserve will cut interest rates at its next meeting on September 18 or even sooner and were preparing for Fed Chairman Ben Bernanke to hint at such a move on Friday at a speech in Jackson Hole, Wyoming. The possibility of a rate cut has given Wall Street some hope that the stock market will recover from its summer volatility, and that right now, it's a good strategy to buy while the buying is cheap.
Wall Street was also enthusiastic about signs of corporate muscle. A jump in oil prices fed a rally in energy company stocks, and positive news from technology companies including Seagate Technology gave that sector a boost.
The Fed, although it has not yet indicated that it will indeed lower the benchmark fed funds rate, has been adding cash to the banking system in an attempt to keep the credit markets liquid.
Stock investors kept an eye on the credit markets for signs of loosening. Though the safest assets, Treasurys, are not seeing the same frantic buying they saw a couple weeks ago, assets with a bit more risk, like commercial paper, are having some trouble attracting buyers.
"Everyone's waiting for the dust to settle there," said Steven Goldman, chief market strategist at Weeden & Co. "We're on a little bit better footing, but we're in a healing process that takes time."
The Dow rose 247.44, or 1.90 percent, to 13,289.29, near its highs of the session. The Standard & Poor's 500 index added 31.40, or 2.19 percent, to 1,463.76, while the Nasdaq composite index gained 62.52, or 2.50 percent, to 2,563.16.
Michael Sheldon, chief market strategist at Spencer Clarke, said he believes investors are positioning themselves ahead of Bernanke's speech. He believes the rebound during the session shows that perhaps investors are becoming more confident the Fed will lower interest rates and that financial institutions can weather their exposure to distressed mortgages and loans.
The Russell 2000 index rose 19.49, or 2.54 percent, to 787.32.


Updated : 2021-02-27 06:48 GMT+08:00