Stocks Rally on Hopes of Federal Reserve Action Amid Global Economic Concerns

Strategic Insights -

Investors are cautiously optimistic that the Federal Reserve will take steps to stimulate the US economy, sparking a rally in stocks on the back of a disappointing economic forecast from the International Monetary Fund. The IMF has reduced its US growth forecast to 1.5 percent this year and 1.8 percent in 2012, fueling fears of another recession. Meanwhile, the global economic landscape remains uncertain, with several European countries facing debt crises and a potential default on loans.

Key Takeaways:

  • The Dow Jones industrial average rose 110 points, or 1 percent, to 11,511 in midday trading.
  • The Standard & Poor's 500 index rose 12, or 1 percent, to 1,216.
  • The Nasdaq composite rose 23, or 0.9 percent, to 2,635.
  • Carnival Corp's stock rose 5.7 percent after the company reported stronger-than-expected earnings.
  • The IMF reduced its US growth forecast to 1.5 percent this year and 1.8 percent in 2012.
  • The European economic outlook has been worsened by concerns over Greece's debt default and Italy's credit rating downgrade to A+/A-1+ by Standard & Poor's.
  • A potential European banking crisis could lead to a global credit crisis similar to the 2008 crisis.

Statistics:

  • US economic growth forecast for 2011: 1.5 percent (IMF).
  • US economic growth forecast for 2012: 1.8 percent (IMF).
  • Carnival Corp's stock price increase: 5.7 percent.
  • Dow Jones industrial average: 11,511 (midday trading).
  • Standard & Poor's 500 index: 1,216 (midday trading).
  • Nasdaq composite: 2,635 (midday trading).

Sources:

  • NYT: Sept. 21.
  • IMF:
  • Carnival Corp: Sept. 21.