Stocks enjoyed a much-needed rally Monday with the Dow Jones industrial average soaring more than 900 points on optimism governments around the world can stabilize the financial system.
USA Today reported that the Dow, Nasdaq composite index and Standard & Poor’s 500 indexes all soared more than 11% as investors hoped the many efforts by central banks to strengthen banks would begin to kick in. The rally in U.S. stocks snapped an eight-day sell-off and comes after strong showings in Asian and European markets as investors applauded the move toward a global coordinated response to the financial crisis.
The rally also comes just as investors’ nerves were seriously worn down by what had been the worst week for stocks in history. Last week, the Dow fell 1874 points, or 18.2%, the deepest loss in a one-week period in history.
Much of the rally came from strength in the financial and materials stocks.
At the closing bell, the Dow Jones industrial average rose 936.42, or 11.08%, to 9,387.61. It was the Dow’s largest-ever point gain ever. The previous record occurred March 16, 2000, during the waning days of the dot-com boom, when the blue chips closed up 499.19, or 4.93%.
Broader stock indicators also jumped Monday. The Standard & Poor’s 500 index advanced 105.07, or 11.68%, to 1,004.29, and the Nasdaq composite index rose 194.74, or 11.81%, to 1,844.25.
About 2,900 stocks advanced on the New York Stock Exchange, while about 250 declined. But the trading volume of 1.22 billion shares was lighter than it had been last week, suggesting there was less conviction in the buying than during last week’s selling.
Governments around the world have been taking unprecedented steps to calm investors and coax banks to lend. Late Friday, Treasury Secretary Henry Paulson announced plans for the U.S. government to inject capital into banks in exchange for partial ownership.
Officials from the Treasury Department and the Federal Reserve announced plans to meet later Monday with top executives from financial firms to work out details of the $700 billion plan aimed at thawing frozen bank lending that is stifling the economy.
President Bush acknowledged Monday that “people all over the world are understandably concerned” but said the United States and other nations are taking “responsible, decisive action” to rescue the global economy.
He said the United States will help banks gain access to capital and unfreeze credit markets.