U.S. Stocks Surge On Expectations Of Fed Rate Cut

NEW YORK (MarketWatch) -- U.S. stocks soared at Tuesday's open, with the market bolstered by better-than-anticipated earnings from Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., as well as expectations of another Federal Reserve interest-rate cut later in the day.

"Expectations are across the board, but the consensus is settling on a 75 basis-point reduction in the fed funds target rate," said Kevin Giddis, fixed-income analyst at Morgan Keegan & Co.

The Fed's decision is expected at 2:15 p.m., Eastern.

The Dow Jones Industrial Average rose 236.26 points in early morning trade to 12,208.51, with all 30 of its components posting opening gains.

Blue-chip financials gained as investors looked to the Fed to trim its benchmark rate to help offset credit-related losses.

Citigroup Inc. was up 4% at the start, while J.P. Morgan Chase & Co. rose 4.3%.

Another Dow component, Exxon Mobil Corp. jumped 2.2% as crude-oil futures gained ground after Monday's slide.

The S&P 500 climbed 27.20 points to 1,303.80, while the Nasdaq Composite gained 43.22 points to 2,220.23.

Volume on the New York Stock Exchange neared 206 million shares, and for every stock on the decline three were on the rise. On the Nasdaq, 118 million shares were exchanged, and advancing stocks outran those declining 4 to 1.

On the New York Mercantile Exchange, crude-oil and gold futures climbed, with the spot month for crude up $2.25 at $107.93 a barrel, and bullion rising $5.40 to $1,008.00 an ounce.

Shares of Goldman and Lehman both gained, with Goldman up 8.5% and Lehman advancing 16.6%. The large investment firms reported before market open that their respective profits fell less than analysts had forecast.

Economic data ahead of the opening bell pointed to further escalation in wholesale prices, which climbed 0.3% in February after a 1% rise the month before. .

A separate report pointed to a bigger-than-anticipated decline in new home construction, offering another glimpse into the embattled housing sector. .

By Kate Gibson