U.S. stocks rose to session highs on Tuesday after a U.S. lawmaker said the Federal Reserve chairman pledged to use all available tools to calm financial markets, increasing speculation about a rate cut.
U.S. crude oil futures fell below $70 a barrel, pushing up airline stocks like the parent of American Airlines, AMR Corp., up nearly 7 percent at $23.73. It was the first time oil has fallen below $70 since July 2.
U.S. Senate Banking Committee Chairman Christopher Dodd said Federal Reserve Chairman Ben Bernanke told him he was willing to use all available tools if necessary to soothe the financial markets. His comments followed a meeting with Bernanke, Treasury Secretary Henry Paulson and others.
Last Friday, the Fed cut the discount rate in a surprise move, causing stocks to rally. Now Wall Street hopes the Fed will cut the target for the fed funds rate, which is the rate banks charge each other on overnight loans.
There's increased speculation on the Fed cutting interest rates sooner rather than later, said Jay Wong, equity strategist at Payden & Rygel Investment Management in Los Angeles. There were just some conments coming out of Christopher Dodd saying that Bernanke is going to use all the tools at his disposal to restore stability to the markets.
Shares of financial companies gained, including American Express Co., up 1.1 percent at $59.35, and JPMorgan Chase & Co., up 1 percent at $46.95.
The Dow Jones industrial average was up 47.23 points, or 0.36 percent, at 13,168.58. The Standard & Poor's 500 Index was up 9.38 points, or 0.65 percent, at 1,454.93. The Nasdaq Composite Index was up 20.78 points, or 0.83 percent, at 2,529.37. (Additional reporting by Kristina Cooke)