Dow rallies after Fed statement, up 429 points
The Fed spoke _ and financial markets rallied.
The Dow Jones industrial average surged more than 429 points, its biggest gain since March 2009. It was just one day after the Dow had its worst point decline since 2008.
The Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013. The central bank also said that it has discussed "the range of policy tools" it can use to spur the economy.
Fed to keep interest rate near zero for 2 years
The Federal Reserve sketched a dim outlook for the economy Tuesday, suggesting it will remain weak for two more years. As a result, the Fed said it expects to keep its key interest rate near zero through mid-2013.
It's the first time the Fed has pegged its "exceptionally low" rates to a specific date. The Fed had previously said only that it would keep its key rate at record lows for "an extended period."
The Fed announced no new efforts to energize the economy in its statement released after its one-day policy meeting. But the statement held out the promise of lower rates on mortgages and other consumer loans longer than many had assumed.
Plunge on Wall Street threatens to spook consumers
WASHINGTON (AP) _ It's the last thing a nervous consumer and a fragile economy needed: a confidence-killing nosedive on Wall Street.
Americans struggling with lean wages, job insecurity and high gasoline prices have seen a 15-percent plunge in stock prices shrink their 401(k) accounts over the past 2 1/2 weeks. When consumers feel less wealthy, they're less likely to buy new furniture, new appliances or new cars. And their spending drives about 70 percent of the economy.
The drop in the stock market, through Friday, could cut overall spending by $140 billion, or 1.3 percent, over the coming year, says Paul Dales, senior U.S. economist at Capital Economics. Dales forecasts that the stock market turmoil could reduce the economy's annual growth rate by half a percentage point through 2012.
Germany at center of storm as stockmarkets dive
BRUSSELS (AP) _ For the last year and a half, Germany has been quick to hit the brakes on expensive plans to fight Europe's worsening financial crisis that support debt-ridden neighbors with billions of euros in bailout funds and extra credit.
Meanwhile, Germany sailed through the crisis relatively unscathed, recording stellar growth as big companies like BMW AG and Daimler AG showed bumper profits and unemployment sank to its lowest level in years.
Now, with stock markets tanking, the currency union's largest member is starting to feel the pain of a slowing European and global economy, as German companies see waning demand for their exports.
Falling gas prices provide motorists some relief
Gasoline cost nearly $4 a gallon this spring. Now it's inching closer to $3. That could leave a typical driver with an extra $15 in their wallets.
That is giving worried families some relief and easing one of many drags on the economy.
While the savings are small, they couldn't come at a better time. People feel less wealthy as stocks nosedive, the value of 401ks plunges and the fear of another recession takes hold.
As banks' shares fall, they say this is not 2008
Even though financial stocks rose along with the market on Tuesday, the stock market declines of the last few weeks have been especially harsh on banking stocks.
Investors remain worried about more regulatory probes, investor lawsuits and other problems that could emerge as big banks continue to work through toxic mortgages and other remnants of the financial crisis.
Bank of America Corp. has been especially hard hit, thanks in large part to its $4 billion purchase three years ago of Countrywide Financial Corp., a lender known for exotic mortgages.
Apple briefly passes Exxon as most valuable US co.
NEW YORK (AP) _ Apple briefly surpassed Exxon Mobil on Tuesday as the nation's most valuable company.
The iPhone and iPad maker had the lead for much of the afternoon before its stock closed just behind Exxon's. The two companies are so close that Apple is likely to keep the top spot soon.
Apple Inc.'s stock gained 5.9 percent to $374.01 on Tuesday, bringing its market capitalization to about $347 billion.
Exxon Mobil Corp.'s stock, meanwhile, closed up 2.1 percent at $71.64. That gives the oil company a market cap of $348 billion. Its stock was down earlier in the day, allowing Apple to take the lead.
GM uncertain that US auto sales will hit forecast
DETROIT (AP) _ The top executive at General Motors Co. is having doubts about whether U.S. auto sales will recover this year as expected, even as the stock market rebounded a bit Tuesday from its huge losses.
Speaking to industry analysts about GM's long-term financial plans Tuesday, GM Chairman and CEO Dan Akerson said the company is sticking with its U.S. sales forecast of around 13 million cars and trucks for the year, but he's not certain sales will make it that high.
But GM's finances, he said, are strong enough to "power through these dips" in sales.
The statements came amid optimistic predictions for the future of the company, which has made billions just two years out of Chapter 11 bankruptcy protection.
US workers were less productive in the spring
U.S. workers were less productive in the spring for the second quarter in a row, a trend that may not bode well for future hiring.
Productivity dropped 0.3 percent in the April-June quarter, following a decline of 0.6 percent in the first three months of the year, the Labor Department said Tuesday. It was the first back-to-back decline in productivity since the second half of 2008.
The drop in productivity helped push unit labor costs up 2.2 percent. That follows a 4.8 percent rise in labor costs in the first three months of this year, the biggest increase since the last three months of 2008.
By The Associated Press(equals)
The Dow Jones Industrial average rose 429.92 points, or 4 percent, to 11,239.77.
The S&P 500 rose 53.07, or 4.7 percent, to 1,172.53. The Nasdaq composite index rose 124.83, or 5.3 percent, to 2,482.52.
Benchmark West Texas Intermediate crude fell $2.01 to end Tuesday at $79.30 per barrel on the New York Mercantile Exchange. It's the lowest end-of-day price since September.
In London, Brent crude fell $1.17 to $102.57 per barrel on the ICE Futures exchange.
In other Nymex trading for September contracts, heating oil fell 3.69 cents to $2.7648 per gallon, gasoline futures dropped 2.4 cents to $2.6676 per gallon and natural gas rose 5.9 cents to $3.994 per 1,000.