Thursday , June 07, 2012 - 9:04 AM
NEW YORK-- Stocks opened sharply higher on Wall Street after China cut its benchmark lending rate in another bid to boost its slowing economy.
The Dow Jones industrial average rose 93 points at 12,506 after the first 40 minutes of trading. The Dow surged 286 points the day before as hopes grew that more economic stimulus is on the way in both the U.S. and Europe.
China cut its benchmark lending rate Thursday for the first time in nearly four years, adding to efforts to reverse a sharp economic downturn. It was the first rate cut since November 2008.
Beijing has rolled out a series of measures to stimulate its economy after growth fell to a nearly three-year low of 8.1 percent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter's growth to fall further.
The rate cut is a huge boost for global investors. China has been a major engine of global economic growth over the past few years as the U.S. sputtered and debt crises spread through several countries in Europe.
The price of crude oil jumped 2 percent to $86 a barrel in reaction to the China news. Faster economic growth in China would mean more demand for energy and other basic materials. The dollar and U.S. Treasury prices fell as investors sold lower-risk investments.
Traders will be closely watching Fed Chairman Ben Bernanke's appearance before a congressional committee Thursday for any hints that the U.S. central bank is considering more monetary stimulus. In prepared testimony, Bernanke said the Fed is still prepared to act, but he didn't signal any immediate steps.
Hopes grew for more action from the U.S. central bank after Atlanta Federal Reserve President Dennis Lockhart said that sustained weakness in job creation could justify more action to support the economic recovery.
The Fed is believed to be considering a third round of "quantitative easing," or purchases of Treasury bonds to try to lower long-term interest rates and encourage borrowing. Traders have speculated that a third round is under consideration.
Markets are also hopeful that Europe is preparing to give Spain financial aid to help it cope with the cost of saving its banks. Spain's government cannot afford to rescue its banking sector but is reluctant to accept a full-fledged bailout from its partners in the euro, as that would mean giving up control over some of its domestic policies.
Stabilizing Spain is crucial to calming the debt crisis because Europe would not be able to bail out the country, which has the fourth-largest economy in the currency bloc.
In other trading, the Standard & Poor's 500 index rose 13 points to 1,328 and the Nasdaq composite index rose 29 points to 2,873.
Among stocks making big moves:
-- Sprint rose 7 cents, or 3 percent, to $2.79 after announcing that it would start selling Apple's iPhone to customers of its Virgin Mobile no-contract phone service.
-- Molina Healthcare plunged $7.62, or 30 percent, to $18.14, after the health insurer withdrew its 2012 profit forecast, citing a possible revenue shortfall in Texas. Molina said member claims in Hidalgo and El Paso have far exceeded its estimates and as a result, the premium revenue it is collecting there will not likely be enough to cover its medical costs.
-- Men's Wearhouse dropped $5.66, 16 percent, to $29.91 after the clothing chain reported lower-than-expected results and issued a weak forecast for its second quarter.
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