U.S. stocks rally after central banks’ move; Dow soars 3.3%

Investing.com - U.S. stock markets were sharply higher after the open on Wednesday, as investors cheered a coordinated move by six major central banks to boost the capacity to inject liquidity into the global financial system.

During early U.S. trade, the Dow Jones Industrial Average soared 3.3%, the S&P 500 index rallied 3.25%, while the Nasdaq Composite index jumped 3%.

In a joint statement, the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank said they had agreed to lower dollar swap rates by 0.5% to prevent a lack of liquidity in the global financial system.

The surprise announcement came after the People’s Bank of China said that it plans to cut banks reserve requirement ratios by 0.5%, in an effort to help boost liquidity and support the world’s second largest economy amid global market turmoil.

Shares in the financial sector led markets higher, with the largest U.S. lender Bank of America jumping 5.35%, JP Morgan Chase shares rallying 5.65%, while Citigroup shares added 5.15%. 

Raw material producers performed strongly, tracking sharp gains in commodity prices. Alcoa shares climbed 4.85%, metal producer Freeport McMoran Copper & Gold surged 6.5%, while U.S.-listed shares of British Petroleum rose 6%.

Meanwhile, shares of American Airlines parent AMR soared 50% after it announced earlier that a U.S. judge granted a series of motions to help facilitate the company’s continued normal business operations. The stock plunged nearly 84% on Tuesday after filing for Chapter 11 Bankruptcy protection.

In earnings news, clothing retailer American Eagle saw shares gain 3.9% after reporting a 59% increase in third quarter net profit. The upbeat results prompted the company to lift its earnings outlook for the fourth quarter. 

Across the Atlantic, European stock markets rallied. The EURO STOXX 50 rose 4%, France’s CAC 40 surged 3.8%, Germany's DAX soared 4.5%, while Britain's FTSE 100 gained 3.2%.

Finance ministers from the single currency bloc were preparing to meet for a second day of talks later Wednesday aimed at addressing the escalating debt crisis in the region, after agreeing on measures to expand the bloc’s bailout fund on Tuesday.

Ahead of the talks, European Union Economic and Monetary Affairs Commissioner Olli Rehn said that the region now faces a crucial 10 days to save the single currency bloc.

Meanwhile, a report from payroll processing firm ADP said U.S. private sector employment increased by a seasonally adjusted 206,000 in November, blowing past expectations for an increase of 130,000.

The previous month’s figure was revised up to a gain of 130,000 from a previously reported increase of 110,000.

The increase in November was the largest monthly gain since last December and nearly twice the average monthly gain since May when employment decelerated sharply.

Separately, industry data showed that manufacturing activity in the Chicago area rose to a seven-month high of 62.6 in November, beating expectations for a reading of 58.6.

Also Wednesday, the National Association of Realtors said its pending home sales index soared by 10.4% in October, blowing past expectations for a 1.2% increase.