Wall Street rallies on rate cuts, bargain hunting

NEW YORK (Reuters) - Stocks climbed on Thursday as investors snapped up shares trading near their lowest levels in five years on optimism that aggressive rate cuts by global central banks, including the Federal Reserve, will help cushion a worldwide economic downturn.

Investors also found support in signs that efforts to loosen up clogged credit markets were taking hold as the rate that banks charge to lend dollars to each other fell, freeing up cash needed to avert a sharp slowdown.

With just a day left in October, stocks are on course to post their biggest one-month loss since the 1987 crash.

In the latest batch of earnings results, Colgate-Palmolive Co rose 7.1 percent to $64.23 on the New York Stock Exchange after the consumer products maker posted quarterly profit that beat estimates.

Although data showed the U.S. economy experienced its sharpest contraction in seven years in the third quarter, the reading on gross domestic product was slightly better than expected.

“Is it going to be perhaps shallower than we were all fearing or is it something that’s going to build like a snowball?” said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management in Rochester, New York.

“There’s perhaps more room for optimism today that we can get through this than there was perhaps two weeks ago.”

The Dow Jones industrial average rose 189.73 points, or 2.11 percent, to 9,180.69. The Standard & Poor’s 500 Index gained 24.00 points, or 2.58 percent, to 954.09. The Nasdaq Composite Index was up 41.31 points, or 2.49 percent, at 1,698.52.

On Nasdaq, shares of Apple Inc, maker of the iPhone and the iPod, rose 6.2 percent to $111.04, while Intel shot up 8.2 percent to $16.17.

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Technology is among the sectors that analysts see poised to be the biggest beneficiaries of an economic revival.

Office Depot Inc leaped 48.6 percent to $3.12 and ranked near the top of the NYSE’s biggest percentage gainers on the day after it said it would delay opening new stores in a weak economy.

Rival Staples Inc ran up 15.6 percent to $18.42 after the world’s largest office products retailer said its third-quarter adjusted profit would beat estimates.

The market’s gains came a day after the Fed cut its benchmark fed funds rate for overnight bank loans by 50 basis points, or a half-percentage point, to 1 percent. The move was followed by rate cuts in Taiwan, Hong Kong and China.

Japan is expected to cut rates on Friday, while the European Central Bank, the central bank of Australia and the Bank of England are expected to cut rates next week.

But investors remain concerned that the efforts to shore up the economy might take longer to yield sustainable results and brighten the profit picture.

The price of oil fell more that 2 percent to settle under $66 a barrel as the U.S. economic data prompted worries that demand could be further dampened.

Airlines’ shares jumped on the sharp drop in U.S. crude futures prices. The Airline Index surged 10.7 percent.

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Exxon Mobil reversed course in afternoon trading and edged up 0.5 percent to $75.05 after the major oil company’s profit exceeded expectations. Exxon, however, said its quarterly oil output fell.

Shares of Hartford Financial Services Group Inc sank 51.6 percent to $9.62 after the property and life insurer reported a surprisingly large quarterly loss, raising concern that it may need to raise more capital. The insurer’s stock was the biggest percentage loser on the Big Board.

Prudential Financial Inc shed 18.1 percent to $28.87 the day after it swung to a quarterly loss that marginally missed the Street’s expectations.

Trading was moderate on the New York Stock Exchange, with about 1.38 billion shares changing hands, below last year’s estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.54 billion shares traded, above last year’s daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by about 4 to 1, while on the Nasdaq, about three stocks rose for every one that fell.

Editing by Jan Paschal