Dow rockets after Fed stimulus boost

US stocks extended a rally that started in September to close at two-year highs yesterday, a day after the Federal Reserve unveiled a plan to boost the economy.

A bullish read on consumers also boosted shares as many retailers posted stronger-than-expected sales for October. The S&P retail index gained 1.7 per cent and apparel maker Gap added 6.1 per cent to $20.43.

Confounding expectations of a sell-off after the Fed’s asset-buying plan, investors instead focused on the flood of cheap money expected to flow into the banking sector from the US central bank’s programme to buy $600bn more of Treasury debt.

“Given the political changes, the monetary policy changes, as well as good seasonal indicators, the market could trend higher through December,” said Eric Teal, chief investment officer at First Citizens Bancshares in Raleigh, North Carolina, which manages about $5bn. “We could move up another five per cent even from these levels.”

Volume reached its highest level since 1 July with 10.34 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, above the year-to-date daily average of 8.73 billion.

The Dow Jones industrial average closed up 219.71 points, or 1.96 percent, at 11,434.84. The Standard & Poor’s 500 Index was up 23.09 points, or 1.93 per cent, at 1,221.05. The Nasdaq Composite Index was up 37.07 points, or 1.46 per cent, at 2,577.34.

Retail stocks surged after October’s same-store sales data, which appeared to bode well for the upcoming holiday shopping season.

Target rose 1.5 per cent to $54.76 while Macy’s advanced 6.6 per cent to $25.56.

Starbucks gained 2.5 per cent to $30.49 in extended trading after it reported fourth-quarter earnings that beat expectations and raised its full-year profit view.

Dow component Kraft Foods posted an adjusted third-quarter profit 1 cent a share ahead of expectations. It also affirmed its full-year outlook, and its stock rose 4 cents to $31.83.

About five stocks rose for every one that fell on the New York Stock Exchange and more than three rose for every one that fell on the Nasdaq yesterday.