Good Thursday on Wall Street
Stocks surge as investors welcome falling oil and gold prices and news that the Fed will make $75 billion in loans available to banks next week. Markets are closed Friday.
NEW YORK (CNNMoney.com) -- Stocks surged Thursday after the Federal Reserve said it will make $75 billion in securities available to banks next week as part of its ongoing effort to ease the credit crunch.
All financial markets are closed tomorrow for Good Friday.
The Dow Jones industrial average (INDU) advanced over 260 points or 2.2%. The broader Standard & Poor's 500 (SPX) index gained 2.4%, and the Nasdaq composite (COMP) jumped 2.2%.
Stocks had risen throughout the session as falling commodity prices, a stronger dollar and signs of stabilization in the manufacturing sector gave investors an incentive to scoop up issues hit in the recent selloff.
But gains sped up in the late afternoon as the Fed detailed the first leg of its new $200 billion lending plan, announced last week. Investment houses will be able to bid on $75 billion worth of safe-haven Treasury securities using some of their more risky investments as collateral. (Full story).
The new auction is the latest in the series of steps the central bank has been taking to try to loosen up the still nearly frozen credit markets and getting banks lending again.
Stocks had tumbled Wednesday, with the Dow losing almost 300 points, as investors gave back nearly all of the previous session's gains, with losses in financials and commodity stocks leading the way.
The big selloff left Wall Street in good position to bounce bank Thursday. The drop in commodity prices, recovering dollar and Fed news helped facilitate that bounce.
Investors also welcomed a report that suggested a less dour outlook for manufacturing than other recent surveys.
The Philadelphia Fed index, a regional manufacturing survey, improved to a reading of -17.4 in March from -24.0 in February. Economists thought it would improve to a reading of -18.0. Any negative reading implies a slowdown in the sector, while a positive reading signals growth.
"I think it's a good sign that we were able to move a bit higher today, but going forward we're going to continue to see volatility," said Dean Barber, president at Barber Financial Group.
He said that certain sectors have been beaten up enough that there are values to be had. Yet, at the same time, "we're not out of the woods yet."
Financial sector news. A variety of big financial stocks rallied on the Fed news and on other developments in the sector. Gainers included Bank of America (BAC, Fortune 500), American Express (AXP, Fortune 500) and JP Morgan Chase (JPM, Fortune 500).
JP Morgan's proposed purchase of the once venerable Bear Stearns (BSC, Fortune 500) for a fire-sale price will be challenged by an investor group that includes Joseph Lewis, one of the company's largest shareholders. Lewis said the group will push Bear to look into other possible transactions. (Full story).
Citigroup (C, Fortune 500) said it was cutting an additional 2,000 investment banking and trading jobs as it continues to seek ways of lowering costs following large credit-related losses.
A number of other financial stocks surged as investors scooped up the recently beaten-down shares. Also helping was a brokerage note from a banking analyst at Punk, Ziegel and Co. Analyst Richard Bove says that now is the right time to invest in banks as the worst is over for the sector, although not for the economy.
Mortgage lenders continued to benefit from Wednesday's news that the government is loosening restraints on Fannie Mae (FNM) and Freddie Mac (FRE, Fortune 500) that will allow them to provide as much as $200 billion more in funding for home loans.
Other company news. FedEx (FDX, Fortune 500) reported weaker earnings and higher revenue versus a year ago, but beat analysts' estimates. However, the company, seen as a proxy for the economy, also projected limited earnings growth in the year ahead.
Nike (NKE, Fortune 500) reported higher quarterly sales and earnings that topped estimates late Wednesday, thanks to strong overseas sales and the benefit of the weak dollar.
General Electric (GE, Fortune 500) was upgraded by Merrill Lynch to "buy" from "neutral," Briefing.com reported.
Market breadth was positive. On the New York Stock Exchange, winners beat losers almost 3 to 1 on volume of 2.77 billion shares. On the Nasdaq, advancers topped decliners almost 2 to 1 on volume of 2.79 billion shares.
Trading volume was heavy due to the quarterly options expiration, in which stock index futures and options and individual stock futures and options are all expiring at the same time.
Economy. The number of Americans filing new claims for unemployment rose more than expected last week to the highest level since January. (Full story).
The February index of leading economic indicators fell 0.3%, as expected, after falling 0.4% in the previous month.
Additionally, economist Lakshman Achuthan of the Economic Cycle Research Institute said that the United States is in a recession and that Congress and the Federal Reserve could have acted to stop it from happening.
Oil and gold prices. Oil prices continued to slip one day after posting their biggest drop in 17 years. Gold prices also plunged anew.
Both oil and gold prices hit record highs early this week, but have slipped since then along with other dollar-traded commodities in response to the stronger U.S. currency.
U.S. light crude oil for May delivery fell 70 cents to settle at $102.54 a barrel on the New York Mercantile Exchange, trimming bigger morning losses. Oil prices hit a record $111.80 in electronic trading Monday.
COMEX gold for April delivery slumped $25.30 to settle at $920 an ounce after tumbling $59 in the previous session. Gold hit an an all-time trading high of $1,033.90 an ounce on Monday.
Other markets. Since hitting an all-time low versus the euro and a 12-year low versus the yen earlier this week, the dollar has recovered a bit as investors have continued to digest the rate cut the Federal Reserve made Tuesday.
The Fed cut interest rates by three-quarters of a percentage point, surprising most traders, who had expected a full-point cut. Although lower rates in general tend to weaken the dollar, the unexpected smaller cut has supported the greenback.
Treasury prices slipped, erasing early gains, raising the yield on the benchmark 10-year note to 3.36% from 3.35% late Wednesday. Bond prices and yields move in opposite directions. 
