Investing.com - Stocks surged Tuesday in their biggest one-day rally since January after Federal Reserve Chairman Jerome Powell said the central bank stood ready to support the domestic economy if trade wars get too crazy.
The S&P 500 jumped 2.1% as 440-plus stocks in the index moved higher. The Nasdaq Composite soared 2.7%, and the Dow added 2.1% or 512 points. The indexes finished very close to their highs on the day.
Oil prices moved higher, as did grain prices on the news. Gold was steady.
The rally was helped by a modest decline in the U.S. dollar, which had been attracting money from investors looking for a safe haven from the volatility caused by the U.S.-China trade war and a tariff dispute with Mexico over immigration.
In a Chicago speech, the Fed chief said the central bank is "closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective."
The market took off on that news, with traders assuming Powell meant the Fed would cut interest rates if necessary.
The speech showed Powell that he has a bully pulpit indeed. Former Fed Chairman Ben Bernanke made a similar promise during the 2011 budget showdown between Congress and President Barack Obama, and markets promptly reversed a summer-long slump.
Ironically, Powell's speech pushed interest rates higher, as investors shed bonds for stocks. The key 10-year Treasury yield rose to 2.119% from Monday's 2.081%.
There may discussion on rates going forward in the minutes when the Fed releases the minutes from its most recent meeting in Wednesday. The minutes from the April 30-May 1 meeting will be released at 11 a.m. ET (20:00 GMT). The Fed has been holding its key federal funds rate at a range of 2.25% to 2.5%, despite complaints from President Trump.
The rally was the biggest since Jan. 4. That day, the Dow jumped 746 points, or 3.3%; the S&P 500 added 84 points, or 3.4%; and the Nasdaq soared 275 points, or 4.3%.
A total of 29 of the 30 Dow stocks gained on the day, led by Nike (NYSE:NKE), Dow (NYSE:DOW) and Apple (NASDAQ:AAPL). Verizon Communications (NYSE:VZ) was the only Dow decliner.
Wynn Resorts (NASDAQ:WYNN), Tesla (NASDAQ:TSLA) and American Airlines Group (NASDAQ:AAL) were the leaders among Nasdaq-100 stocks. All had been slammed recently by the trade disputes. Only three stocks in the index were lower.
The weak areas of the market overall were interest-rate sensitive stocks like real estate and utilities.
Tuesday's rally was so broad much of the buying decisions were computer-generated. For evidence, look at the uniformity of the S&P 500, Nasdaq and Dow gains. A trigger may have been that that the relative strength indexes of the major market indicators had fallen below 30 on Monday. An RSI under 30 is often a buy signal. In addition, the Nasdaq and Nasdaq-100 ended the day no longer in correction territory, defined as a 10% decline from a recent peak.
S&P winners and losers
Mattel (NASDAQ:MAT), Wynn Resorts (NASDAQ:WYNN) and Xerox (NYSE:XRX) were among the top performers in the S&P 500 on Tuesday.
Nektar Therapeutics (NASDAQ:NKTR), Veritas (NYSE:VTR) and HCP (NYSE:HCP) were among the biggest S&P 500 laggards.