The S&P 500 added 2.4 percent to 2,061.14 at 4 p.m. in New York, its largest one-day gain since January 2013. The index has climbed 4.5 percent over two days, the most since November 2011.
“Just as with other instances, a dovish Fed is making up for a lot of bad news, from Europe and from other parts of the world,” Russ Koesterich, chief investment strategist at New York-based BlackRock Inc., said in an interview on Bloomberg Television. “This is why you have this rebound rally after a few days of very harsh losses.”
The MSCI All-Country World Index soared 2 percent and emerging-market stocks surged 1.8 percent. The Stoxx Europe 600 Index advanced 3 percent, the most in three years. Treasuries sank the most in 17 months. Crude oil slumped 3.2 percent after wiping out a 4 percent rally.
The Chicago Board Options Exchange Volatility Index lost 13 percent to 16.95. The VIX has plunged 28 percent over two days. The index climbed to a two-month high on Dec. 16.
U.S. stocks are rebounding from a seven-day decline that erased $1 trillion from equity prices and coincided with a 15 percent drop in West Texas Intermediate crude between Dec. 5 and Dec. 16. S&P 500 energy producers tumbled 8 percent over the stretch while chemical and mining companies lost 7.4 percent.
Should it continue, the recovery would be the fifth time this year the S&P 500 has come back after falling more than 4 percent from a high. In comparable drops beginning in January, April, July and September, the index needed about a month to erase losses, data compiled by Bloomberg show.
The Fed meeting took place after a series of government reports showing that the U.S. economy is thriving. Payrolls rose by 321,000 last month, the biggest increase in almost three years, while retail sales increased 0.7 percent, the most in eight months.
Jobless claims decreased by 6,000 to 289,000 in the week ended Dec. 13, the fewest since early November, a Labor Department report showed today in Washington. The Conference Board’s leading indicators index, a gauge of the outlook for the next three to six months, increased 0.6 percent in November. The median forecast of 49 economists surveyed by Bloomberg called for a 0.5 percent advance.
“There’s no reason why the S&P 500 cannot continue to chug higher,” said Jonathan Aldrich-Blake, a U.S. equity fund manager at Ashburton Investments in Jersey, the Channel Islands. “The U.S. economy is one of the safest bets in the world, and the Fed coming out with a dovish tone yesterday just gives investors the confidence they needed.”
Stocks in the benchmark gauge for U.S. equities are heading for their third consecutive annual gain and have risen almost 200 percent since global equities bottomed in 2009. The biggest bull market since the 1990s technology bubble was fueled as the Fed executed three rounds of bond buying to stimulate the economy and held interest rates near zero since December 2008.
Equities rallied yesterday as Fed Chair Janet Yellen clarified the central bank’s monetary policy plans, saying it is likely to hold rates near zero at least through the first quarter. She also laid out the economic parameters that would need to be met for liftoff to begin later in the year and said that rates probably would be raised gradually thereafter. They may not return to more normal levels until 2017, she added.
December has been one of the strongest months for equities since the bull market began. The S&P 500 has risen in the year’s final month sixth consecutive times, posting an annual average return of 2.2 percent. The index has pared this month’s decline to 1.1 percent.
Gains in the measure have been led by health-care companies and utilities, up 20 percent or more from the start of the year, followed by technology producers, makers of household products and banks and brokerages. Energy companies have been the biggest drag, falling 13 percent thanks to declines in four of the last five months.
Stocks in the S&P 500 are trading at 18 times annual earnings after valuations reached a four-year high of 18.3 times profit earlier this month. Income among the gauge’s constituents is poised to rise 3 percent in the fourth quarter and 7.3 percent in 2015, analyst estimates compiled by Bloomberg show.
Among industries, analysts estimate that earnings will grow fastest next year for consumer discretionary companies, at 14.1 percent, followed by commodity producers at 14 percent and technology makers at 13.2 percent. Energy companies may see profits fall more than 13 percent in 2015, analyst estimates compiled by Bloomberg show.