US Market goes frenzy in Fed fuelled rally

Dow registers largest percentage gain in almost five years

US Market was in its happiest moods in months today, Tuesday, 11 March, 2008 after Federal Reserve infused some good rally through its comments. The Fed announced its plans to increase liquidity by expanding its securities lending program. Crude oil almost kissed the $110 mark. Nine of the major economic sectors finished in positive territory. Financials posted a huge gain while Healthcare finished as the sole sector in negative territory.

The Dow Jones industrial Average ended the day with a huge gain of 417 points at 12,157. The Nasdaq Composite Index, finished higher by 86 points at 2,256. S&P 500 finished higher by 47 points at 1,320. Twenty-nine out of thirty Dow stocks ended in the green today led by Citigroup. The stock soared by almost 9% today on Federal Reserve’s plans. Other financial stocks like American Express, JP Morgan also posted handsome gains. Boeing was the sole decliner of the day.

The Federal Reserve announced today that it was taking coordinated steps with other central banks to boost liquidity in financial markets. Also, it announced that as per its Term Securities Lending Facility (TSFL), the Fed will lend up to $200 billion of Treasury Securities to primary dealers secured for a term of 28 days, rather than overnight. The borrowers will be able to pledge a variety of collateral ranging from federal agency debt to private AAA rated residential mortgage backed securities.

With this news, the strong rally started in the market since the very start of the day. Financials led the rally throughout the day with gained steam for the whole day. The thrifts and mortgages group saw the steepest rise, as traders bet the ability to use mortgage backed securities stands to benefit the group the most.

The technology sector also modestly outperformed the broader market. This came in the face of lowered earnings guidance from Texas Instruments.

Healthcare sector ended lower today after WellPoint said it expects its full year 2008 income to be much lower than consensus expectation.

All Indian ADRs ended in green today. ICICI Bank and HDFC Bank were the two topmost gainers going up by 12% and 10% respectively.

Crude prices shot up once again today. Prices rose after the dollar remained under pressure after Federal Reserve Chairman said that Fed is making efforts to alleviate increasing strains in financial markets that are curtailing credit available to homeowners and companies. Crude-oil futures for light sweet crude for April delivery today closed at $108.75/barrel (higher by $0.85/barrel or 0.8%) on the New York Mercantile Exchange. They earlier surged to $109.72 a barrel, the highest since trading began in 1983.

Volume on the New York Stock Exchange neared 1.9 billion, and advancing stocks outran those declining 5 to 1. On the Nasdaq, 1.1 billion shares were exchanged, and advancers overtook decliners 3 to 1.

For tomorrow, The weekly inventory report on crude and crude products by EIA is the only economic report due for the day.