Stocks surged to their highest level in five months Tuesday after a report that activity in U.S. services companies powered ahead in September, a hopeful sign for the economy’s largest sector and the country’s main source of employment.
A surprise move by the Bank of Japan to cut its key interest rate to virtually zero also lifted stocks worldwide. The dollar fell as investors shed defensive assets, and a gauge of U.S. stock market volatility fell.READ MORE: Michigan School District Makes Masks Mandatory After Community Vote
The Institute for Supply Management reported that the U.S. services industry grew slightly faster in September as demand from customers improved. It was the ninth-straight month of expansion in services, which have been growing at a slower pace in the U.S. relative to the much smaller manufacturing sector.
Traders are also hoping to get more positive news from the beginning of corporate earnings reports this week and from another key economic indicator, the Labor Department’s monthly jobs survey on Friday. PepsiCo Inc. and Alcoa Inc. report results on Thursday.
In corporate news, Mexican broadcaster Grupo Televisa said it would invest $1.2 billion in Univision Communications, expanding a license deal between the Spanish-language media heavyweights. Televisa’s U.S. shares rose 9.8 percent.
The Dow Jones industrial average rose 193.45 points, or 1.8 percent, to close at 10,944.72. All but one of the 30 companies that make up the average rose, led by Boeing Co. and Bank of America Corp. American Express Co. fell again, a day after the company said it would fight an antitrust lawsuit, even after Visa and MasterCard settled similar suits.
The Standard & Poor’s 500 index rose 23.72, or 2.1 percent, to 1,160.75. The index broke through 1,150, a level it hadn’t traded above since mid-May, and kept on going.
Robert Pavlik, chief market strategist at Banyan Partners LLC in New York, cited another factor in today’s upward swing: Even when stocks have fallen lately, the S&P 500 has managed to stay above 1,130, a key technical barrier that it had broken through on Sept. 20. He said that has given jittery investors confidence to buy.READ MORE: Gov. Whitmer To Propose Tripling Michigan's Tax Credit For Low-Wage Workers
“A lot folks who have cash on the sidelines are being drawn into the market because they don’t want to be left behind,” Pavlik says. “I think there’s potential to get to 1,200 by the end of the year.”
The Nasdaq composite index rose 55.31, or 2.4 percent, to 2,399.83.
Other market indicators also suggested growing confidence among investors. An index measuring the dollar against six major currencies fell 0.7 percent, the CBOE Market Volatility Index fell 7.2 percent to its lowest level since Sept. 24, and crude oil rose $1.35 to settle at $82.82 a barrel.
In a surprise move, Japan’s central bank cut its key interest rate target to a range of zero to 0.1 percent, and is looking to buy government bonds in an effort to boost the faltering Japanese economy. Japan has been struggling with a strong currency and falling prices, and authorities there intervened in currency markets last month to weaken the yen, but the impact was short-lived.
Investors are also hoping for more action from the Federal Reserve to boost the U.S. economy, and got more encouragement from remarks by Fed Chairman Ben Bernanke late Monday. Bernanke said the economy could be helped by another round of asset purchases by the central bank, and hopes are building that the Fed could announce new measures at its next meeting Nov. 2 and 3.
Stocks were also trading higher in Europe. Britain’s FTSE 100 rose 1.4 percent, Germany’s DAX index rose 1.3 percent, and France’s CAC-40 rose 2.3 percent. Hong Kong’s Hang Seng index rose 0.1 percent.
About five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares.MORE NEWS: Oxford High School Reopening Jan. 24 For First Time Since Shooting
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