An American flag flies in front of the New York Stock Exchange, Wednesday, Oct. 8, 2014 in New York.Mark Lennihan/The Associated Press
The Federal Reserve's hint that interest rates will stay near zero sent investors rushing back to the stock market, igniting the biggest swing for the Standard & Poor's 500 Index in six months.
The S&P 500 rose 1.6 percent to 1,966.20 at 3:36 p.m. in New York. From trough to peak, the index moved 41 points, the most since April, data compiled by Bloomberg show. The rally recouped yesterday's slump, when the benchmark gauge sank 1.5 percent amid concern over global growth and weaker economic data from Germany. The Dow Jones Industrial Average climbed 242.75 points, or 1.5 percent, to 16,962.14 today.
The gains in Canada were less impressive, as crude oil prices continued to lose ground. The S&P/TSX composite index was up 79 points, or 0.5 per cent, at 14,655.
Minutes from the Federal Open Market Committee's last meeting showed a number of policy makers said U.S. growth "might be slower than they expected if foreign economic growth came in weaker than anticipated." In a statement following the September gathering, policy makers renewed their pledge to keep interest rates near zero for a "considerable time" after ending bond purchases this month. They also projected a steeper increase in borrowing costs next year.
"The Fed is telling us if they raise rates it's because of a good economy," John Canally, an economic strategist at LPL Financial Crop. in Boston, said in a phone interview. "If you're up on stocks it's because it's more of the same from the Fed, not lurching closer to a rate hike."
Volatility Surge
U.S. stocks have lurched back and forth for the past week, driving a measure of 10-day volatility to the highest level since April, according to data compiled by Bloomberg. The last time the S&P 500 posted back-to-back moves of more than 1 percent was in July.
The Chicago Board Options Exchange Volatility Index sank 12 percent to 15.22 today. The gauge known as the VIX jumped 11 percent yesterday to the highest since March.
Among stocks moving today, Costco Wholesale Corp. gained 2.8 percent after saying profit topped forecasts. Merck & Co. and UnitedHealth Group Inc. added at least 2.8 percent to pace gains in the Dow Jones Industrial Average. Apple Inc. rallied 2.2 percent to send the Nasdaq 100 Index higher by 2 percent, the most since January.
The S&P 500 sank 1.5 percent yesterday to the lowest since Aug. 12 after the International Monetary Fund cut economic- growth forecasts and warned of "frothy" equities. European stocks today tumbled to a two-month low on concern that equity valuations have overshot the potential for economic growth and earnings.
Appropriate Guidance
The Russell 2000 index jumped 1.7 percent, its best gain since July to erase an earlier slide of 1 percent. The small-cap gauge had fallen more than 10 percent from its March record through yesterday as investors sold speculative shares.
"Some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the committee's goals," minutes of the gathering show.
Alcoa Inc. unofficially starts the earnings season after the close of markets today. Profit at companies in the S&P 500 rose 4.9 percent in the July-September period, according to the average estimate of analysts in a Bloomberg survey.
The benchmark index fell 3.3 percent in the past month through yesterday, the worst pre-earnings performance since 2009. The gauge has averaged a 2.2 percent gain in that period since the bull market began.