Sunday, September 23, 2007

U.S. stocks posted their biggest weekly gain since March after the Federal Reserve cut its benchmark interest rate by half a percentage point.

Exxon Mobil and Freeport-McMoRan Copper & Gold helped lead energy and raw-materials stocks higher on expectations that lower borrowing costs would buoy the economy and increase demand for commodities. Goldman Sachs Group climbed the most since April 2001 after reporting a 79 percent profit gain, easing concerns that turmoil in credit markets would curb earnings at banks and brokerages.

The Standard & Poor's 500-stock index climbed 2.8 percent, to 1525.75. The Dow Jones industrial average rose 2.8 percent, to 13,820.19. The Nasdaq composite index rose 2.7 percent, to 2671.22.

The S&P had its steepest one-day rally in four years Tuesday after the Federal Reserve cut the key federal funds rate to 4.75 percent, lower than most economists surveyed by Bloomberg News had predicted. The central bank pledged to "act as needed" to prevent credit-market losses and the housing slump from dragging down the economy.

"The market was hoping for a cut, and they got a big one," said Stephen Wood, senior portfolio strategist at Russell Investment Group in New York. "That should be buoyant for equity prices."

The yield on the 10-year Treasury note rose 0.17 percentage points, the most since March 2006, to 4.63 percent, on speculation the Fed's reduction would cause inflation to quicken and erode the value of fixed-income securities.

Oil reached a record $83.90 a barrel in New York.

Reports this week on gross domestic product, home sales and consumer spending may help investors gauge the impact of losses stemming from the subprime mortgage market's swoon.

"The real-estate crisis is worse than the market has realized," said Bruce McCain, head of strategy for the investment management unit at Key Private Bank in Cleveland. "The worst is yet to come in terms of foreclosures."

Tomorrow, the Treasury will sell $16 billion of three-month bills and $13 billion of six-month bills. They yielded 3.80 percent and 4.10 percent, respectively, in when-issued trading. Also tomorrow, details will be announced of the Tuesday auction of four-week bills, the Wednesday sale of two-year notes and Thursday auction of five-year notes.

-- Bloomberg News