Wall Street scores 2nd-best day ever on rate-cut hopes

NEW YORK (Reuters) - Wall Street marked its second-best day ever on Tuesday as investors, convinced that central banks worldwide will cut rates even more, scooped up stocks that had been driven down to their lowest prices in more than five years.

A big catalyst for the late-day surge was a huge drop in the Japanese yen after a news report that the Bank of Japan may cut interest rates later this week. A sudden strengthening of the yen during the past week had been destabilizing stock markets around the world, and Tuesday's reversal of that trend was greeted with relief by investors.

The Federal Reserve is expected to cut its benchmark fed funds rate by at least 50 basis points on Wednesday when it concludes a two-day meeting that began this afternoon.

Shares of capital-hungry companies such as telecoms posted the day's sharpest gains, including Verizon Communications, up over 14 percent, and AT&T, up over 13 percent.

Big oil companies gave the Dow its biggest boost after British major BP Plc reported a record quarterly profit, beating expectations. Exxon Mobil and Chevron both rose more than 13 percent.

Shares of Boeing jumped 15.5 percent to $48.91 after the aircraft manufacturer reached a tentative agreement with its largest union to end a strike and stop revenue losses estimated at $100 million a day.

Typically when the market gets to oversold extremes, stocks see a bounce back, said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

"If you believe that governments around the world are going to be successful in reenergizing financial markets and gradually bringing back confidence and stability in the weeks and months ahead, then you probably want to be more of a buyer than a seller," Sheldon said.

The Dow Jones industrial average jumped 889.35 points, or 10.88 percent, to 9,065.12. The Standard & Poor's 500 Index surged 91.59 points, or 10.79 percent, to 940.51. The Nasdaq Composite Index ran up 143.57 points, or 9.53 percent, to 1,649.47.

It was the second-biggest point gain ever for the Dow and the S&P. These advances were surpassed only by the rally on October 13, when the Dow jumped 936.42 points and the S&P 500 climbed 104.13 points after governments pledged to pour cash into struggling banks and a Japanese banking group completed its investment in Morgan Stanley.

The yen's recent rally forced an unwinding of the so-called "carry trade" -- a phenomenon of Japan's low interest rates, in which investors borrowed yen to finance investments in higher-yielding assets, such as U.S. stocks.

On Tuesday, the dollar achieved its biggest gain against the yen since 1974, according to Reuters data.

Rest of the Story Reuters. 

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