Buying Frenzy: Central Bank Maneuver, Uplifting Data Propel Dow 490 Points Higher

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Wall Street rocketed higher in the final trading session of what has been a tumultuous month as traders cheered a coordinated action by central banks to buttress money markets and a bounty of bullish economic data, pushing the Dow and S&P 500 above psychologically-important levels.

Today's Markets

The Dow Jones Industrial Average soared 490 points, or 4.2%, to 12,046, the S&P 500 jumped 51.8 points, or 4.3%, to 1,247 and the Nasdaq Composite leaped 105 points, or 4.2%, to 2,620.

Stocks have made an abrupt shift into rally mode this week, following a steep multi-week selloff. Indeed, the Dow is now above the 12,000 mark, while the S&P 500 surpassed the 1,200 level.

The Dow's performance on Wednesday was the seventh best since the blue-chip index was created in 1896 on a point basis, and the best on a percent basis since 2009.  The rest of the month was choppy, but this week's rally helped offset much of the earlier loss.  For the month, the Dow rose 0.7%, the S&P 500 slipped 0.5% and the Nasdaq stumbled 2.4%.

On the day, every major sector was in the green, but energy, basic materials and financial firms saw the most buying. Additionally, roughly 98 of every 100 stocks on the broad S&P 500 ended the in the green along with every blue chip. More than 97% of volume on the New York Stock Exchange was in advancing shares, and volatility plunged 9.3%.

Out of the blue chips, Caterpillar (NYSE:CAT), the world's biggest heavy equipment maker, and JPMorgan Chase (NYSE:JPM) were the top performers, closely followed by Alcoa (NYSE:AA) and Bank of America (NYSE:BAC).  Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) lagged behind with the shallowest gains.

Conversely, Home Depot (NYSE:HD) was the best performing Dow component for the month, soaring 10%, while Bank of America (NYSE:BAC) posted the worst performance, plunging 20%.

U.S. Treasury yields spiked as traders rushed out of the safe haven and into equity markets.  The benchmark 10-year note yields 2.08% from 1.984%.

Central Banks Join Forces

While news from Europe has ruled the day in many prior sessions, central bank actions are shaking up world markets.  The Federal Reserve, European Central Bank and four other central banks unveiled a coordinated action to provide liquidity to "ease strains in financial markets."

"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said in a statement.

Essentially, the Fed reducing the cost of providing dollar funding to the other banks in exchange for their respective currencies to "improve liquidity conditions in global money markets," according to the Fed's website.  The swaps are temporary, generally ranging from overnight to three months, and there is a binding agreement to reverse the transaction at a later point, according to the website.

The other banks involved were The Bank of Canada, the Bank of England, the Bank of Japan, and the Swiss National Bank. The move comes on the heels of the Chinese central bank's cutting of the required reserve ratio on the largest lenders to ease credit conditions there. The world's second-biggest economy grew at an annualized pace of 9.1% in the third quarter of this year -- the slowest rate since the second quarter of 2009, raising worries that it may be slowing down.

"The coordinated action by the global Central banks is welcome news," Fred Dickson, chief investment strategist at Davidson Companies, wrote in an e-mail.  "However, we do not see this as the terminal big bang event that marks the end of the current eurozone financial crisis.

The euro spiked on the news of the central banks' actions, recently jumping 0.9% to $1.344.

Energy markets were in the green as well.  The benchmark crude oil contract traded in New York climbed 57 cents, or 0.57%, to $100.36 a barrel.  It was a strong month for crude oil, which soared 7.7% and ended in the green for the second-straight month.

Wholesale RBOB gasoline gained 3 cents, or 1.1%, to $2.57 a gallon. Gas edged lower by 0.7% on the month.

Flurry of Upbeat Economic Data

A report by payroll firm ADP showed the private sector added 206,000 jobs in November, blowing past forecasts of a 130,000 increase.  The September number was also revised higher to 116,000 from 91,000.  The labor market has been slowly recovering since the unemployment rate hit 10.1% in October 2009.  Small businesses have shown particularly robust job growth, the data have shown in recent months.

The number of planned layoffs fell 0.7% to 42,474 in November from the month prior, according to outplacement firm Challenger, Gray & Christmas.  The number of planned job cuts were down 13% from last year, and were driven by the public sector.

The Institute for Supply Management's gauge of manufacturing in the Midwest jumped to 62.6 in November from 58.4 the month prior.  This report comes ahead of the more closely watched ISM survey that covers the entire U.S.

The number of U.S. home buyers who signed contracts to buy previously occupied homes jumped 10.4% in October from the month prior to the highest level since November 2010, and far exceeding economists' expectations for a gain of 1.5%.

The economy grew at a "slow to moderate pace" in most of the Federal Reserve’s districts in October, while hiring remained subdued, according to the central bank’s Beige Book released Wednesday afternoon.

In metals, gold leaped $31.40, or 1.8%, to $1,750 a troy ounce.

Foreign Markets

European blue chips soared 4.3%, the English FTSE 100 leaped 3.2% to 5,505 and the German DAX spiked 5% to 6,089.

In Asia, the Japanese Nikkei 225 fell 0.51% to 8,435 and the Chinese Hang Seng dipped 1.5% to 17,989.