US stocks surged on Wednesday as all three major indexes climbed more than 2 percent and Dow Jones industrials rose more than 200 points for the second consecutive day. The climb came after a Federal Reserve official hinted that it may lower interest rates.
Wall Street reacted positively after Fed Vice Chairman Donald Kohn told the Council on Foreign Relations that recent turbulence may curb credit for household and businesses more than expected. Kohn said he factored some tightening of credit from the financial turmoil into his policy decisions.
The increased turbulence of recent weeks partly reversed some of the improvement in market functioning over the late part of September and October, he said in a speech to the Council on Foreign Relations in New York.
Uncertainties about the economic outlook are unusually high right now, Kohn said. These uncertainties require flexible and pragmatic policymaking... nimble is the adjective I used a few weeks ago.
Financial Service companies saw a recovery in shares as Citigroup ignited the rebound on Tuesday after it sold a $7.5 million stake to Abu Dhabi, causing S&P's to spike. Meanwhile, American International Group Inc led financial stocks to climb on the Dow Jones index. Citi shares rose 7.1 percent to $32.40 and AIG stock was up 4.9 percent at $57.18.
The Dow Jones industrial average was up 264.28 points, or 2.04 percent, at 13,222.72. The Standard & Poor's 500 Index was up 30.32 points, or 2.12 percent, at 1,458.55. The Nasdaq Composite Index was up 67.00 points, or 2.60 percent, at 2,647.80.