NEW YORK—U.S. stocks rallied Wednesday with the Dow Jones Industrial Average soaring by 287 points, based on a lack of bad news out of Europe and hopes that the Federal Reserve would engage in a new round of stimulus.
The Dow Jones Industrial Average jumped 2.4 percent, and the S&P 500 Index gained 30 points, or 2.3 percent Wednesday. The Nasdaq Composite Index increased by 2.4 percent, or 67 points. On average, the gains on June 6 were the biggest one-day percentage increases of 2012.
All 30 components of the Dow were up, and Wednesday’s rally put the blue-chip index back in the black for the year, after a dismal performance in May. All 10 S&P sectors were also in the black for the day.
Some market watchers described the day’s gains as a “relief rally,” which typically occurs in the absence of bad news following several days of stock market losses.
The gains followed stock market bounces in Europe, after the European Central Bank (ECB) met Wednesday and investors speculated that recent market events would compel politicians to take stronger, more coordinated action. The ECB decided to keep rates unchanged, at 1 percent, despite calls for an interest rate cut. But Mario Draghi, ECB’s president, said that short-term liquidity management will continue and left the door open for a rate cut at its next meeting in July.
The STOXX Europe 600 Index gained 2.3 percent Wednesday, as investors hoped that EU governments would take further action on the festering sovereign debt crisis. The euro currency also recovered, soaring against the dollar and the yen on Wednesday.
Buoying the stock markets in the United States is speculation by traders that Federal Reserve Chairman Ben Bernanke will embark on a third round of quantitative easing (QE) to stimulate economic growth. The likelihood of another round of QE had been dismissed, but an unexpected recent jump in the nation’s unemployment rate and continued sluggishness of the economic recovery could serve to reignite QE discussions.
Banks were the biggest gainers on Wall Street. Shares of some of the biggest U.S. banks led the way. JPMorgan Chase & Co. shares jumped 3.4 percent, while Bank of America Corp. gained 7.6 percent.
But any short-term optimism should be tempered until more clarity can be gained from the upcoming Greek elections, which are due on June 17.
Depending on what happens then, Greece could be faced with a messy exit from the eurozone with European banks taking additional losses on Greek bonds. In addition, Spain is struggling with a banking crisis and is seeking help from the eurozone to bail out its banks.
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