World Business

US stocks rebound on Fed rate decision, brighter assessment

(Xinhua)
Updated: 2010-04-29 09:43

NEW YORK: US stocks rebounded after Tuesday's steep sell-off on Wednesday, as investors found support in Federal Reserve's upgraded statement on the economy and robust corporate earnings.

Wall Street experienced its worst day in nearly three month on Tuesday after Standard & Poor's cut its long-term sovereign credit rating on Greece to junk status. The rating cuts rattled investors and sent US dollar to a one-year high against the euro, also ending the Dow's six-day winning streak by dragging it down more than 200 points.

Market sentiment seemed recovered a little bit on Wednesday, helping most stocks open moderately higher.

Major indexes lost ground and slipped rapidly to negative area before the noon after Standard & Poor's downgraded Spain's credit rating from AA+ to AA with a negative outlook, a day after its rating downgrades on Greece and Portugal.

"We now project that real GDP growth will average 0.7 percent annually in 2010-2016, versus our previous expectations of above 1 percent annually over this period," S&P said in a statement.

However, Spain's downgrading didn't have a long-lasting influence on the market as another major rating firm, Fitch Ratings said shortly after that it still has a AAA rating on Spain with a stable outlook, saying "The fiscal adjustment program the government has put in place is a strong one."

Market sentiment was further boosted after Fed released a more optimistic statement after it's two-day rate-setting meeting.

"Economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the Federal Open Market Committee said in a statement in Washington.

Federal Reserve officials also said economic activity has " continued to strengthen" and the labor market is "beginning to improve", while growth in household spending has "picked up recently."

Among the latest companies posting robust results, Dow Chemical said its first-quarter profit soared on strong sales in all its geographic areas. Its share jumped nearly 6 percent during the session.

It was also worth mentioning that Palm Inc soared 27 percent in after-market trading as Hewlett-Packard announced to buy Palm for $1.2 billion. HP will pay 5.70 dollars cash for per share of Palm, a 23 percent premium to its closing price on Wednesday of $4.63.

As the market closed, the Dow Jones industrial average rose 53. 28, or 0.48 percent, to 11,045.27. The Standard & Poor's 500 index gained 7.65, or 0.65 percent, to 1,191.36 and the Nasdaq edged up 0.26, or 0.01 percent, to 2,471.73.