The American trading day had begun with US stocks falling 3.1 per cent, following European shares lower on fears that the Federal Reserve’s 75 basis point cut in interest rates would not be enough to prevent a recession.
However, the S&P 500 finished 2.14 per cent higher after traders learned the New York state insurance regulator had convened a meeting with leading banks to discuss capital injections of up to $15bn to prop up credit insurers.
Market activity was so frantic during the day that some traders turned off their algorithmic trading systems and did their business by telephone or used other more traditional methods.
Banks led the market higher, with the S&P Financials index rising 6.77 per cent. JPMorgan and Bear Stearns both gained almost 12 per cent.