Stocks rallied sharply Wednesday, with the Dow posting its biggest one-day point and percentage gain this year, after global central banks announced a plan to support the global financial system and a handful of better-than-expected economic reports.
The Dow Jones Industrial Average surged 490.05 points, or 4.24 percent to close at 12,045.68, above the psychologically-important 12,000 level, led by Caterpillar and JPMorgan. With the day's gains, the blue-chip index ended in the black for November is back in positive territory for 2011.
The S&P 500 soared 51.77 points, or 4.33 percent, to end at 1,246.96. The Dow and S&P are on track to post their best weekly point gains in almost three years. Nasdaq jumped 104.83 points, or 4.17 percent, to finish at 2,620.34.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled to finish below 28 for the first time since early November.
All 10 S&P sectors closed firmly in positive territory, led by financials and materials.
The world's major central banks including the ECB, Federal Reserve, Bank of England and the central banks of Canada, Japan and Switzerland agreed to coordinated actionto ease the increasing strains on the global financial system.
The move is designed to "enhance their capacity to provide liquidity support to the global financial system."
“If you stop and think about it, you have to realize what kind of danger the world is in for all the central banks to get together and save Europe,” said Alan Valdes, director of floor operations and VP of trading at DME Securities.
Meanwhile, Valdes added that barring overly negative news from the euro zone, the market is poised for a “Santa rally.”
“The S&P is going up another 7 to 8 percent in December—you’ve got a lot of money managers and traders who are going to have to play catch up.”
Adding to the optimism, China surprised with its first cut in banks' reserve requirements in hopes of boosting an economy running at its weakest pace since 2009.