US stocks surged yesterday after major central banks agreed to make cheaper dollar loans for struggling European banks to prevent the Eurozone debt woes from turning into a full-blown credit crisis.
The S&P 500 posted its best daily percentage gain since August after the Federal Reserve, the European Central Bank and other major central banks stepped in to head off escalating funding pressures that threaten the key arteries of the world’s financial system.
The central banks’ liquidity move touched off a buying frenzy in financial shares. The S&P financial sector index gained 6.6 per cent, with Bank of America the most actively traded stock. The stock jumped 7.3 per cent to $5.44 on more than 420m shares traded.
The drama in Europe kept the US stock market on a roller-coaster ride throughout the month. For November, the S&P ended down just 0.5 per cent, but the month was marked by sharp daily swings.
“You don’t have to fix everything, you have to be on a path towards fixing things,” said Tobias Levkovich, chief US equity strategist at Citigroup in New York.
“Markets will reward you for the efforts you are making as long as you are moving in the right direction. It's the carrot and the stick; you get rewarded when you do the right thing, and you get punished when you do the wrong thing.”
The Dow Jones industrial average shot up 490.05 points, or 4.24 per cent, to end at 12,045.68. The Standard & Poor’s 500 Index jumped 51.77 points, or 4.33 per cent, to 1,246.96. The Nasdaq Composite Index soared 104.83 points, or 4.17 per cent, to close at 2,620.34.
The Dow scored its largest daily points gain since 23 March 2009.
For the month, the Dow ended up 0.8 percent, while the Nasdaq slid 2.4 per cent.
Other economically sensitive sectors, including energy, materials and industrials, also were strong performers for the day.
Copper and oil futures rose sharply, while the S&P materials sector index jumped 5.9 per cent.
The central banks’ actions were intended to ensure that European banks, facing a credit crunch, have enough funding amid the Eurozone’s worsening sovereign debt crisis.
The moves followed an unexpected cut in bank reserve requirements in China, intended to boost an economy running at its weakest pace since 2009.