Stocks Rally on Fed’s Resolve to Aid Economic Recovery

Banks offered the greatest gains in the welcome stocks rally with Bank of America experiencing a 5 percent jump and leading the pack. Other financial institutions to experience more than a 2 percent hike included Morgan Stanley, Goldman Sachs, JPMorgan Chase and Citigroup. With Monday and Tuesday experiencing sharp drops, analysts were of the opinion that a rally was inevitable. The rebound was fueled by Bernanke’s comment that the Fed has the “tools to do more” and the further assurance that the Fed is prepared to take action in promoting economic recovery. This appeared to overshadow the fact that the Fed had adjusted its economic growth outlook for 2011 to between 1.6 percent and 1.7 percent. This also revived hopes that the Fed may consider launching QE3 – another round of quantitative easing – even if not in the immediate future.

While things may look a bit brighter on the home front, Wall Street investors are still keeping a wary eye on Europe. The announcement by Greek Prime Minister George Papandreou on Tuesday that a referendum will be held to get the people’s opinion of participating in the proposed European debt plan had a negative impact on markets around the world, including Wall Street. With Greece having already faced unrest in protest against austerity measures, it is widely anticipated that the Greek people will vote against the plan. This would require European leaders to rethink the situation, which is likely to increase investor uncertainty and market volatility. It has been reported that Greece was high on the agenda during the G-20 Summit in Cannes on Wednesday, and with the summit officially beginning on Thursday, investors will be looking to participating world leaders to formulate a plan to avert the crisis threatening both the euro currency, and the global economy.