Stocks Soar After Drop in Oil, Fed Remarks - TheStreet

Stocks Soar After Drop in Oil, Fed Remarks

A decline in oil futures helps inspire Wall Street traders to bid up equities. Frank Curzio reviews the big Fed Day in The Real Story.
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Updated from 3:19 p.m. EDT

Stocks in the U.S. rallied sharply Tuesday as a selloff in oil prices, a better-than-expected report on the services sector and a positive reaction to the latest

Federal Reserve

comments sent the major averages soaring.

The

Dow Jones Industrial Average

surged 331.62 points to 11,615.77, and the

S&P 500

jumped 35.87 points to 1284.88. The

Nasdaq

climbed 64.27 points to 2349.83. All advanced more than 2.8%.

The market was strong all day, and the gains swelled after the Federal Open Market Committee said it would hold its target for the fed funds rate at 2%. Though the economy grew in the second quarter, labor markets have softened and "financial markets remain under considerable stress," the Fed said in a statement.

"Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth," the comments continued.

The Fed also said that while inflation has been a concern, it expects price increases to moderate later this year and next year, but that the outlook is "highly uncertain."

Meanwhile, crude oil continued falling, shedding $2.24 a barrel to $119.17. Oil earlier slid to a point where it last sat at the start of May, and it has now decreased almost $30 since it approached $148 a barrel less than a month ago.

The

United States Oil

(USO) - Get Report

, an ETF that tracks crude prices, was down 2%.

Also helping was the Institute for Supply Management's index on the services sector of the economy, which climbed to 49.5 last month from 48.2 in June. Analysts were looking for a reading of 49. Additionally, the ISM's prices paid measure dropped from its record level the previous month.

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As for corporate earnings,

Procter & Gamble

(PG) - Get Report

, a component of the Dow, topped profit and revenue estimates and said its first-quarter results should be in line with expectations.

Homebuilder

D.R. Horton

(DHI) - Get Report

had a quarterly loss, though its revenue, despite sinking more than 40% from last year, matched analysts' targets.

Duke Energy

(DUK) - Get Report

and

Marvel Enterprises

(MVL)

both exceeded expectations, while

Archer Daniels Midland

(ADM) - Get Report

had a surge in revenue and easily surpassed forecasts.

Among notable analyst actions, UBS initiated

Apple

(AAPL) - Get Report

with a buy rating and a $195 price target, and Merrill Lynch downgraded

Nortel

(NT)

to underperform from neutral.

On the fixed-income side, Treasury prices were lower. The 10-year note was down 9/32 in price, yielding 4%, and the 30-year bond was off 17/32, yielding 4.62%. The dollar was mixed against its main competitors.

Major markets in Asia were weaker during the prior session, but Europe's bourses were uniformly stronger.

This article was written by a staff member of TheStreet.com.