The Standard & Poor’s 500 Index jumped to the highest level since January 2008 and Treasuries fell as the European Central Bank announced a bond-buying plan and reports fueled optimism in the U.S. economy. Spanish and Italian debt surged.
The S&P 500 rallied 2 percent to 1,432.09 at 4 p.m. in New York and the Stoxx Europe 600 Index surged 2.3 percent, the best gains in more than a month for both. The euro increased 0.3 percent to $1.2640, while Italy’s 10-year yields fell 25 basis points and the rate on similar-maturity Spanish debt lost 38 basis points, while 10-year U.S. yields increased eight points to 1.67 percent. Oil pared earlier gains while gold climbed to the highest price since March.
ECB President Mario Draghi said policy makers agreed to an unlimited bond-purchase program to reduce interest rates for struggling nations and fight speculation of a breakup of the euro. U.S. jobless claims declined last week and companies added more workers than forecast in August, reports showed today before monthly payrolls data tomorrow. A gauge of American service industries topped economists’ estimates.
“The market was looking for signs that the ECB and some part of the European Union would basically stimulate in Europe and guarantee the sovereign debt,” David Pearl, who oversees $24 billion in assets as co-chief investment officer at New York-based Epoch Investment Partners, said in a phone interview. “Draghi pretty much gave what the market was looking for. The U.S. data is at least moving positively and we’re in a recovery.”
The ECB’s bond-buying plan is the most ambitious yet in the central bank’s fight to wrest back control of rates in a fragmented economy and save the euro after nearly three years of turmoil. The central bank reserved the right to terminate bond purchases if governments don’t fulfill their part of the bargain, Draghi said.
The S&P 500 in August had reached its highest level on an intraday basis in more than four years, then failed to close at that milestone. The index has risen almost 14 percent this year as European leaders worked to tame the region’s debt crisis and the Federal Reserve vowed to safeguard the economic recovery. Fed Chairman Ben S. Bernanke said in Jackson Hole, Wyoming, last week he wouldn’t rule out more stimulus.
Today’s gain was the first of the week for the S&P 500. Gauges of financial, commodity and technology companies helped lead gains in the 10 main industry groups in the index. Bank of America Corp., JPMorgan Chase & Co. and Cisco Systems Inc. surged more than 4 percent and were among the biggest advances in the Dow Jones Industrial Average, which jumped as much as 244 points.