Stocks Skyrocket Ahead of Fed Rate Decision

News at a Glance

• Late Leap: Stock surge on global rally, policy meeting; Dow up 10.9%.
• Fed Meets: FOMC begins two-day meeting on interest rates.
• Crisis of Confidence: Consumer index falls to record low.
• Homes Lose Value: Case-Shiller indexes fell again in August.

The Lowdown

Wall Street came roaring back on Tuesday, as traders seized on equities and hoped for an interest rate cut before tomorrow's close.

Stocks surged on Tuesday afternoon ahead of what traders anticipate will be a stimulative policy move from the Federal Reserve on Wednesday. The major indexes spent the day firmly in the black, but a late boost left each one up more than 9.5%. The Dow Jones Industrial Average climbed 889 points -- most of which during the last two hours of the session -- to finish the day at 9065. The Dow had entered the trading at its lowest point since April 1, 2003. Back then, it took the Dow more than two months to do what it did today in six and a half hours.

The broader indexes also posted broad gains. The Nasdaq picked up 144 points to close at 1649, and the S&P 500 climbed 92 to 941.

The rally lifted every sector. Energy, materials, consumer cyclicals, financials and telecoms led the market. Techs, consumer staples and health care stocks also performed extremely well.

The bounce began as the Fed kicked off a two-day meeting, during which it is widely expected to lower the federal funds rate in an effort to stimulate the economy. Most economists predict a 50-point cut, which would leave the rate at 1.00%. The Fed is scheduled to release its policy statement tomorrow at 2:15 p.m.

Central banks are in focus this week after a G-7 meeting that ended with the promise of a coordinated effort to keep the global economy from plunging deeper and restore balance to the world's currencies. The Bank of Japan meets Friday to discuss policy and the surging yen.

In their bullishness, traders brushed off some weak economic data. The Consumer Confidence Index plunged to a record low of 38.0 in October, eclipsing the previous record of 43.2 set in December 1974, when the U.S. economy was hobbled by stagflation.

The housing market continued to show weakness. Home prices kept on falling at the end of the summer, according to the latest reading of the S&P Case-Shiller indexes. The 10-city composite index fell a record 17.7% in August, marking its 25th consecutive drop.

On the Nymex, oil futures rose with the broader market. By 4:06 p.m., crude traded up $1.23 on the day at at $64.45 a barrel.

In Washington, there is a new hurdle in the government's bailout of the financial sector: finding the manpower to deploy a $700 billion package to the affected institutions. Complications over hiring asset managers and a short-handed Treasury could delay the transfer of funds, The Wall Street Journal reported, citing anonymous sources.

Most of the world's major stock indexes rebounded after yesterday's sharp decline -- a selloff that stretched around the world and touched nearly every sector. In Asia, Japan's Nikkei gained 6.4%, while Hong Kong's blue-chip Hang Seng climbed 14.4%. In Europe, the major indexes of London, Paris and Frankfurt each gained at least 1.5%.

Corporate News

• Boeing (BA) and the International Association of Machinists and Aerospace Workers have forged a tentative four-year labor agreement, Boeing said. The contract, which should end the labor strike that shuttered the company's commerical airplane unit for 52 days, covers 27,000 employees in Washington, Oregon and Kansas.
• BP (BP) posted an 83% jump third-quarter net income. The energy giant earned $8.05 billion, up from $4.41 billion in the year-ago period. The increase was largely the result of elevated oil prices, the firm said.
• Whirlpool (WHR) expects to trim 5,000 jobs from its payroll by the end of next year to cope with softening demand during the financial crisis, the firm said in its third-quarter earnings statement. Whirlpool's net income for the period fell to $163 million, or $2.15 a share, down from $175 million, or $2.20 a share, in the year-ago period.

The Economy

• The Consumer Confidence Index fell to an October reading of 38.0, a record low and down sharply from a revised September reading of 61.4, the Conference Board said. Economists had predicted an October reading of 52.0. REPORT

ReadMe

• The Washington Post on global monetary policy: The world's central banks are now struggling to curb a credit crisis and a currency imbalance. STORY
• BusinessWeek on the business media: The daily horror stories could be contributing to the market's unrest. And in other news, OMG! STORY
• CNNMoney on the auto industry: Detroit may be next in line behind Wall Street for government aid. STORY

WatchMe

• CNBC on equities: The recent rash of selling has left some traders ready to go bargain hunting. VIDEO
• Bloomberg on the yen: Matthew Kassel, director of proprietary trading at ING Financial Markets, expects the Bank of Japan to step in and sell currency to slow its rise. VIDEO
• Forbes 20 Richest Women in Entertainment: Bear in mind that this list is a year old. Rich women in entertainment whose portfolios included a high percentage of mortgage-backed securities in 2007 may find themselves ranked somewhat lower this year. E!, 9 p.m.