Stocks rallied sharply Tuesday after the services sector expanded at a better-than-expected pace last month and Japan's central bank surprised traders by slashing interest rates to near zero. The Dow surged nearly 200 points, while inflation fears propelled gold to another record close.

The blue-chip Dow Jones Industrial Average ($INDU) gained 193, or 1.8%, to close at 10,945. The broader S&P 500 ($INX) rose 24, or 2.1%, to 1,161. The tech-heavy Nasdaq Composite ($COMPX) added 55 points, or 2.4%, to finish at 2,400.

Basic materials and capital goods stocks were among the biggest winners after the nation's services sector, which accounts for the bulk of economic activity, beat expectations. Dow components Boeing (BA), Caterpillar (CAT), DuPont (DD) and United Technologies (UTX) led the blue chips higher, rallying 3% or more. Google (GOOG) and Apple (AAPL) paced tech stocks with gains of 3.2% and 3.7%, respectively.

Global Market Gains

The Institute for Supply Management said Tuesday its services index rose to 53.2 last month from 51.5 in August. Economists, on average, expected the measure to rise to 52. ISM index readings above 50 signal an expansion; below 50, a contraction.

U.S. markets followed sharp gains in Asia and Europe overnight after the Bank of Japan announced it would slash its benchmark interest rate to near zero in an effort to revive its sluggish economy. The move comes less than a month after the government intervened in currency rates, buying up dollars in an effort to curb the rise of the yen and to help Japanese exports.
Japan's surprise move at monetary easing renewed global inflation fears, sending gold to a new nominal record close. Gold for December delivery, the most heavily traded contract on the Comex division of the New York Mercantile Exchange (CME), jumped $25 to $1,342 an ounce.

Oil prices closed at a five-month high, as oil for November delivery closed up $1.27 at $82.74 a barrel. Treasury prices held firm, with the yield on the benchmark 10-Year Treasury note unchanged at 2.47%. Bond prices and yields move in opposite directions.

Traders still have to contend with the start of third-quarter earnings season Thursday and September's unemployment report at the end of the week. Year-to-date, the Dow is up 5%, while the S&P 500 has gained 4%. The Nasdaq is up 5.8%. Gold, as measured by the the SPDR Gold Trust exchange-traded fund (GLD), has added 22%.

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Chevy HHR Generator Problem: Good to hear he took his problem to GM Headquarters. Seems Americans across this country are fed up with bad service, unresponsive personnel who are supposed to help you and poor quality products. Good will has no price, had GM done the "right thing" and listened to their customer, understood the commonality between his generator problem on his HHR and the other models, a lot of frustration would have melted away on behalf of the customer. When is American Industry going to recognize well served customers will return again and again?

October 05 2010 at 4:56 PM Report abuse rate up rate down Reply
1 reply to condondeb's comment

Also doesn't make GM look like they are grateful to the American public for the bailout last year. It's sad that it took a potentially damaging news story for him to be able to reach someone that helped him out. After all, he drove 450 miles to speak with someone about the situation...the least GM could have done is take the elevator down a few floors for a face to face conversation. Shows that big corporations have still not learned their lessons.

October 05 2010 at 5:33 PM Report abuse rate up rate down Reply