Dow surges as central banks join forces
The world's largest banks make a coordinated effort to enhance liquidity. China's central bank cuts reserve requirements. US companies add more jobs than expected. October home sales spike.
Updated at 12:49 p.m. ET
U.S. stocks were surging Wednesday, catapulting the Dow more than 400 points, after some of the world's biggest central banks said they would take steps to boost the global economy.
The central banks of Canada, England, Japan, Europe, Switzerland and the U.S. announced measures to "ease strains in the financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said.
The central banks will lower the prices of existing temporary U.S. dollar liquidity swap arrangements by 50 basis points. The new rate will take effect on Dec. 5. London's FTSE was rising 2.7%, and Germany's DAX was gaining 4.2%.
Recent dollar liquidity swap arrangements have been created in response to strains in short-term funding markets in Europe. They’re designed to not only improve liquidity conditions in the global money markets, but also to reduce the risk that problems abroad could spread to U.S. markets.
“Markets will rally on yet another ‘quick fix’ and ‘illusion of progress,’” says Jeffrey Sica, president and chief investment officer of SICA Wealth Management. “Banks are severely overleveraged and no amount of stimulus could curtail the crisis without causing significant long-term economic problems.”
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These promising developments have, for now, helped steer some attention away from the shaky details on how European finance ministers plan to bolster the European rescue fund after their meeting in Brussels on Tuesday. Investors are now looking at the European summit on Dec. 9 for more direction on how European leaders plan to contain the debt crisis amid soaring borrowing costs in Spain and Italy. Economic and Monetary Affairs Commissioner Olli Rehn said Wednesday that Europe faces a “critical” period of 10 days to rescue the eurozone.
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Trading volume was mild, with about 1.3 billion shares changing hands on the New York Stock Exchange and roughly 491 million on the Nasdaq.
In corporate news, Standard & Poor's cut its ratings of Goldman Sachs (GS), Bank of America's (BAC) Merrill Lynch unit and Citigroup's (C) long-term debt to A-minus from A, and put their ratings on a "negative" watch. S&P's new ratings were part of a sweeping change to its rating method for 37 financial institutions published earlier this month. Wells Fargo (WFC) was downgraded to A-plus from AA-minus, and JPMorgan Chase (JPM) was cut to A from A-plus.
Pfizer's (PFE) best-selling product, the cholesterol drug Lipitor, will be offered in generic form starting Wednesday. The drug manufacturer has reached an agreement with some drugstores and pharmacy benefit managers that will allow patients to receive Pfizer's Lipitor at similar or potentially lower co-payments than the generic version. The move aims to help Pfizer to hold onto sales of the blockbuster drug. Watson Pharmaceuticals (WPI) said Wednesday it began shipping an authorized generic version of Lipitor.
OmniVision Technologies (OVTI), the digital imaging company, gave a weak outlook for the current quarter. OmniVision, which makes image sensor chips used in mobile phones, computers and other products, said it expects non-GAAP earnings of 5 cents to 17 cents a share for the quarter ending in January, with revenue between $160 million and $180 million. Analysts expect Omnivision to post a profit of 26 cents a share in the quarter on revenue of $201.4 million.
WebMD (WBMD) is exploring a sales process, according to a source with knowledge of the situation. The medical information company is already in discussions with private-equity firms, the source said, and has hired an investment bank, which is believed to be Credit Suisse.
The U.S. dollar index, which measures the dollar against six currencies, was falling 0.9% at $78.326 because the central bank effort will lead to more dollar-lending at cheaper prices. Gold, considered a hedge against inflation, for February delivery was adding $29 at $1,747.90.
The benchmark 10-year Treasury was falling 21/32, lifting the yield to 2.07%.
In economic news, Automatic Data Processing (ADP) said companies added 206,000 jobs in November, up from a revised 130,000 in October. Economists surveyed by Thomson Reuters had expected private-sector jobs to increase by 130,000 in November.
The Chicago Institute for Supply Management said its gauge of manufacturing activity in the upper Midwest increased to 62.6 in November from 58.4 in October. Economists had forecast the purchasing managers index to remain unchanged. A reading above 50 indicates expansion in the manufacturing sector.
The National Association of Realtors' pending home sales index for October iincreased by 10.4% to a reading of 93.3 from 84.5 in September. Economists had expected to see a 1.5% gain, according to Thomson Reuters.
“Today’s solid batch of domestic economic data in the U.S. reminded the market that we in in a very different economic backdrop today than we were in 2008,” LPL Financial economist John Canally said.
The Federal Reserve will issue its Beige Book summary of economic conditions in 12 Federal Reserve districts at 2 p.m.
China's central bank also said Wednesday that it will cut the reserve requirement ratio for lenders by 50 basis points starting Dec. 5. The move, the first since December 2008, is expected to help bolster China's economy and increase liquidity while markets in developed nations struggle to stabilize. The rate cut may also signal that China will consider loosening its monetary policy in the future.
I wonder how many of the "average' investors got notified yesterday by their broker letting them know the central banks were going to unite and that the market would "surge", "soar" and "rocket" on the news?
I also find it appalling that politicians and govt officials are basically exempt from trading on insder information so I wonder how many of them went "all in" in this morning know the market would "surge" today... That law needs to be changed and they need to abide by the same laws as everyone else. Why should they be allowed to trade on insider info and the rest of us would be tossed in jail? Just another example of the corruption that exists...
So can you all see why our poltical rep's look the other way when bank executives give themselves big bonuses? The fed prints more money and then it is laundered through the banks. Meanwhile, Dem's and Repub's are making our money more and more worthless which makes the average guy more and more desperate to make ends meet.--all because politicians are unwilling to take any sort of action that might hurt their chances of getting re-elected. I suppose tomorrow we will be told there is no inflation and we will be asked to believe that too. The system we have in place is so dysfunctional it is going to crash and the only question is when.
This action by World Central Banks tells you only 1 thing........That we are headed for a world wide depression.... Wait depression is too weak a word, we are headed for Global Economic Devastation. It didnt work in Japan, it didnt work in the US, it didnt work in Europe, what makes them think this will work this time?
What a surprise...Stocks go up and so does the price for a barrel of oil...Make gasoline $2.00 a gallon again and see what the economy does.
For those that read and believe the Bible it does say that the world will have one currency before the end of times...Guess what one step closer......
Makes total sense to me. Nothing could go wrong with a move like that, right???
Oh my effin head!!! (delk '11)
The rate cut may also signal that China will consider loosening its monetary policy in the future. Markets were becoming optimistic about the possibility the Asian superpower will once again come to the rescue of the global economy.
1 minute ago Yesterday weren't 37 banks downgraded? Where is all this money coming from? I like to think positive, but reality needs to play a part as does common sense.
This action by World Central Banks tells you only 1 thing....
This global economy is tanking and they don't have enough any answers!
Nothing has worked because people don't have jobs!
This is nothing more than the White Shoe boys taking down the the suckers that was shorting the market...they use the media to get a certain amount of money flowing in "their desired" direction and then they take the market in the opposite direction. These guys on Wall Street are crooks plain and simple!
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[BRIEFING.COM] The major indices have notched fresh highs with the Dow leading the way. The blue chip index trades higher by 0.4% as Home Depot (HD 78.84, +2.08) and JPMorgan Chase (JPM 53.39, +1.10) provide notable support. On the downside, Travelers (TRV 84.54, -1.01) is the biggest index underperformer, trading lower by 1.2%. Outside of Travelers, no other Dow component trades with a loss larger than 0.4%.
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