19 Mar 2009

Wall St rallies as Fed buys long-term US Treasuries

10:19 am on 19 March 2009

Stocks in the United States rose on Wednesday after the Federal Reserve said it will buy long-term Treasury bonds for the first time in four decades.

The move by the Fed is aimed at resuscitating lending in the recession-hit economy.

Shares of financial companies and home builders rose as investors bet that the move would kick-start lending.

Bank of America Corp rose by 22.3% to $US7.67 and home builder

Horton Inc was up 7.7% to $US9.07.

The Dow Jones home construction index climbed 8.3%.

The Dow Jones industrial average gained 90.88 points, or 1.23%, to 7,486.58.

Standard & Poor's 500 Index advanced 16.23 points, or 2.09%, to 794.35. The Nasdaq Composite Index rose 29.11 points, or 1.99%, to 1,491.22.

The rally was another step forward in a bounce from 12-year lows reached earlier this month.

The Fed said it will buy up to $US300 billion worth of longer-term US government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions.

Earlier, The Wall Street Journal reported that IBM was likely to pay $US10 - $US11 per share to buy Sun Microsystems.

Shares of the computer maker surged by almost 79% to $US8.89 on Nasdaq. IBM stock fell 1% to $US91.95 on the New York Stock Exchange.

Trading was heavy on the New York Stock Exchange, with about 2.08 billion shares changing hands - above last year's estimated daily average of 1.49 billion.

About 2.78 billion shares were traded on the Nasdaq - above last year's daily average of 2.28 billion.