Stocks rocketed up Wednesday after the Federal Reserve said it was joining other major central banks in injecting more money into the global financial system.
Approaching 1:30 p.m. Eastern, the Dow Jones Industrial Average was up 3.44 percent, the S&P 500 rose 3.35 percent, and the Nasdaq was up 3.31 percent.
The move by the central banks of of Europe, the U.S., Britain, Canada, Japan and Switzerland is intended to keep credit freely available around the world. Lending has tightened as the eurozone’s financial crisis has dragged on.
"The central banks of the world have resolved that there will not be a liquidity shortage," said David Kotok, chairman and chief investment officer of Cumberland Advisors, told the Associated Press. "And they have learned their lessons from 2008. They don't want to take small steps and do anything incrementally, but make a big bold move that is credible."
Borrowing rates for European nations have skyrocketed on concerns that the European debt crisis has engulfed nations such as Italy which are too big to bail out. Borrowing rates for Italy, Spain and others have soared.
Banks need dollars to fund their daily operations. Their access has dried up as U.S. money market funds reduced their lending to European banks.
However, the New York Times reported, the move by the central banks underscored the depth of the problem.
“The markets are breathing a sigh of relief,” said Stanley A. Nabi, chief strategist for the Silvercrest Asset Management Group.
But the coordinated action also signaled that the problem had reached a crisis point, he said, and that the central banks recognized there was a “lot of danger” in letting the current situation continue.
In other financial news, stocks great day happens despite Standard & Poor's Ratings Services lowered its credit ratings for many of the world's largest financial institutions on Tuesday, including the biggest banks in the U.S.
Bank of America Corp. and its main subsidiaries are among the institutions whose ratings fell at least one notch Tuesday, along with Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co.
Related:
