Stocks jump after 5 days of heavy selling
U.S. stocks broke a five-day losing streak Wednesday, as shares rose around the world, oil and metal prices rallied and Treasuries fell on speculation China will broaden efforts to boost growth and U.S. lawmakers will reach agreement on a plan to stem mortgage defaults.
Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. jumped more than 12 percent and Chevron Corp. rose 2.7 percent as an official in China said Premier Wen Jiabao will announce a new stimulus plan Thursday. Caterpillar Inc., the biggest maker of bulldozers, surged 13 percent. The Standard & Poor's 500 Index rebounded from a 12-year low after five straight losses dragged its valuation to the cheapest since 1986.
"Stocks are cheap and the sun will rise again," said Lawrence Creatura, a New York-based money manager at Federated Investors Inc., which oversees $407 billion. "There's a ray of sunshine in two areas: China and housing. It's an incremental positive for both commodities and housing."
In Washington, the Obama administration announced details of a plan that could help struggling U.S. homeowners by lowering the cost of their monthly mortgage payments.
The rally was broad, lifting shares in every industry except for financial services. Major indicators surged more than 3 percent during the day before ending with gains of more than 2 percent.
The advance followed five straight sessions of unrelenting selling that left major indexes at levels not seen in more than a decade. That left stocks overdue for a bounce, traders said.
"Virtually everyone was expecting some sort of a bounce, we just didn't know exactly when that would occur," said Randy Frederick, director of trading and derivatives at Charles Schwab. "You can't go down forever."
Wall Street followed the lead of overseas markets, which rose sharply on optimism over the possible Chinese economic stimulus plan. In the U.S., investors were further encouraged by details of a Washington program designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.