Stock surge aims toward recovery

NEW YORK - The Federal Reserve wanted to push interest rates lower and jump-start financial markets with its $600 billion economic-stimulus plan. So far, it is getting the results it wants.

Stock indexes soared as long-term interest rates sank Thursday, a day after the Fed announced its massive bond-buying plan. The Dow Jones industrial average rose nearly 220 points, reaching another high for the year. All three main stock indexes have now reached 2010 highs this week.

Overseas, markets also rallied on the Fed's action. Stocks rose 2 percent in London, 1.9 percent in Paris, 1.6 percent in Hong Kong, 2.2 percent in Tokyo.

After five straight days of gains, the Dow Jones industrial average returned to levels last seen in early September 2008, before the collapse of Lehman Bros. Holdings Inc. and the worst days of the financial crisis.

"Much of today's gains comes as a result of the government's pumping money into the market," said Joe Kinahan, the chief derivatives strategist at TD Ameritrade Holding Corp.

The dollar fell against other currencies as traders anticipated lower U.S. interest rates because of the Fed's bond-buying program. Crude oil, gold, and other commodities increased.

The Dow rose 219.71 points, or 1.96 percent, to close at 11,434.84. The broader S&P 500 index rose 23.10 points, or 1.93 percent, to 1,221.06, and the technology-heavy Nasdaq composite gained 37.07 points, or 1.46 percent, to 2,577.34.

Retailers reported solid sales in October, sending shares of major retailing companies sharply higher. Gap Inc. rose 6.07 percent while Macy's Inc. jumped 6.63 percent.

"Those retail numbers are telling us that the holiday season is going to get off to a good start," said Stephen Jones, the chairman of Jones Villalta Funds.

On Wednesday, the Federal Reserve announced it plans to buy $600 billion in bonds to spur spending and ultimately lower the unemployment rate. The central bank was unusually detailed in its announcement, saying it planned to spend $75 billion a month on bonds until at least the middle of next year. That is on top of the roughly $35 billion a month it is already buying.

In corporate news, shares of BHP Billiton P.L.C., the world's largest mining company, rose 6.78 percent after the Canadian government rejected BHP's $38.6 billion bid to buy Potash Corp. of Saskatchewan Inc.

The Fed's plan will increase the supply of dollars held by banks and most likely push the value of the currency down. The dollar is at its lowest level since December 2009 against a broad basket of currencies, and was down 0.8 percent against that index Thursday. Energy prices jumped, sending oil up $1.80 to close at $86.49 a barrel.

Finance ministers in emerging economies such has China and Brazil have criticized the Fed's stimulus plan, arguing that low interest rates in the United States could fuel asset bubbles in their countries.

Rising asset prices can be rewarding, at least in the short run. But over time, they raise the danger that speculators will drive prices of stocks, real estate, or other assets so high that a crash, like the U.S. housing bust, becomes inevitable.

That fear is growing in Asia and elsewhere.

"These countries say, 'We cannot even absorb our own savings,' " said Marc Chandler, global head of currency strategy at the investment firm Brown Bros. Harriman & Co. " 'Now we've got to handle the world's savings?' "

Five stocks rose for every one that fell on the New York Stock Exchange, where trading volume came to 1.3 billion shares.