In a stark reversal, the Dow Jones Industrial Average closed 429.92 points higher on Tuesday after a late-afternoon rally.
Monday, the first session since Standard & Poor’s announced it was cutting the United States’s top AAA credit rating, was the worst day on Wall Street since December 2008.
On Tuesday, the Dow gained about 4 percent, the S&P 500 gained 4.74 percent, and the Nasdaq gained 5.29 percent. Stocks were off to a positive start early as investors awaited an early afternoon policy statement from the Federal Reserve. Stocks see-sawed wildly as investors parsed the Fed’s statement, eventually rallying before the closing bell.
The Federal Open Market Committee, which steers monetary policy, announced the Fed would be keeping interest rates at rock-bottom levels through mid-2013, a longer time horizon than the central bank usually provides and giving some certainty to jittery markets. The Fed did not, however, announce any new monetary jolts despite significantly darkening its assessment of the recovery—but it offered a large hint that it may act at its next meeting.
The FOMC said its members discussed a “range of policy tools” the Fed could deploy to promote economic recovery, and the Fed “is prepared to employ these tools as appropriate.”