U.S. Stocks Gain

U.S. stocks and Treasuries surged and the dollar tumbled after the Federal Reserve unexpectedly announced plans to buy $1 trillion of bonds in an effort to lower consumer borrowing costs and end the recession.
TradingEconomics.com, Bloomberg 3/18/2009 2:32:55 PM

The Standard & Poor’s 500 Index added 2.1 percent, extending its rally since last week’s 12-year low to 17 percent. Yields on 10-year notes dropped the most since at least January 1962 after the central bank said it will spend $300 billion buying Treasury debt and up to another $750 billion on bonds backed by government-controlled mortgage companies. The dollar sank the most against the euro since September 2000.

The S&P 500 rose to 794.35 at 4 p.m. in New York and earlier surpassed 800 for the first time in a month. The stock index trimmed its 2009 loss to 13 percent. Yields on benchmark 10-year notes plunged 0.50 percentage point to 2.51 percent. The dollar depreciated as much as 3.3 percent to $1.3493 per euro.

Fed Chairman Ben S. Bernanke is trying to bolster housing and hasten the end of the 14-month U.S. recession. He stepped up efforts after unemployment increased to 8.1 percent and economists forecast the economy will shrink through the middle of the year. Fed officials also kept the benchmark interest rate at between zero and 0.25 percent to combat the weak” short- term economic outlook, according to a statement today.

Citigroup Inc. and Bank of America Corp. each jumped more than 22 percent, leading a gauge of financial shares in the S&P 500 to a 10 percent rally and the highest level in a month. The index has surged 54 percent since March 6.

The central bank also said it will consider expanding the Term Asset-Backed Securities Loan Facility, meant to unfreeze business and consumer lending, to include other financial assets.”

Treasuries had lost investors 3.4 percent since December, on course for the worst three-month period since the third quarter of 1980, when they fell 5.06 percent, according to a Merrill Lynch & Co. index. Investor concern about rising supplies of debt and gains in equities depressed prices, pushing yields up from record lows in the fourth quarter.

Thirty-year bond yields fell to a record low of 2.509 percent on Dec. 18, less than three weeks after Fed Chairman Ben S. Bernanke first mentioned the option of buying Treasuries. Yields climbed to as high as 3.84 percent earlier today.