U.S. stock markets rose on Wednesday, following equities around the world, after Chinese authorities signaled they would announce additional stimulus measures to help spur growth. Chinese Premier Wen Jiabao was set to announce a new stimulus package in his annual address to the nation’s legislature.
The MSCI world stock index gained 2.2%.
China will spend more on infrastructure and to boost manufacturing in addition to the stimulus package announced in November. The Communist Party’s Politburo pledged last month a “massive” increase in government investment this year, and Standard Chartered Bank said the original $585 billion spending plan may be doubled.
The Shanghai Composite Index closed 6.1% higher on Wednesday. The official manufacturing index climbed for a third month in February and while manufacturing contracted for a fifth month, the PMI is up from a record low of 38.8 in November, a sign that the world’s third-biggest economy may be edging closer to a recovery.
At Wednesday's close of floor trading on the NYSE, the DOW was on 6876.39 with a gain of 150.37 points (2.24%). The S&P finished on 712.79, up 16.46 points (2.36%) although it declined about 1.55% in the last 30 minutes of trading. The technology-heavy NASDAQ closed on 1352.52 after advancing 31.51 points (2.39%).
The dollar traded in risk-acceptance mode as stocks rose, finishing the session with declines of 0.64% to the euro, 2.04% against Australia's dollar and 0.94% to sterling as it gained 0.95% on the yen.
Treasuries declined as stocks rose, with yield on the 2-year note gaining 7.5 basis points to 0.958% while yield on the 10-year note rose 11.2 basis points to 2.996%.
Crude for March delivery was recently trading up $3.49 (8.40%) to $45.15 per barrel after the weekly inventory report showed a larger drawdown on stockpiles than expected and that demand for gasoline improved for a fourth week
Gold for April delivery was recently trading lower by $7.20 (-0.79%) to $905.70, down from a high on $1006.50 per ounce from Feb. 20.
The Federal Reserve's survey of business activity, known as the Beige Book, showed the economic picture worsened in the first two months of the year and provided little hope for a quick turnaround.
National economic conditions deteriorated further, the Fed's survey concluded. The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.
Looking ahead, business people rated the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010.
Lending fell across the U.S. and credit availability “remained tight,” the Fed said.
“Consumer spending remained very weak on balance, albeit with slight firming noted by many districts,” the Fed report said. About half of the districts said consumer demand was slower or “fell significantly” from a year earlier.