Wall Street hails ECB Bond Buying Program

NEW YORK, Sept. 7 -- Wall Street hailed Thursday the new bond-buying program announced by the European Central Bank, pushing commodity prices higher and stocks to multi-year highs. The rally in the stock market was broad based, with more than three-fourths of stocks listed on both the New York Stock Exchange and Nasdaq ending in positive territories.

The blue-chip Dow Jones industrial average logged its biggest daily gain in two months, rallying 244.52 points, or 1.87 percent, to end at 13,292.00.

The broader Standard & Poor's 500 surged 28.68 points, or 2.04 percent, to 1,432.12, its highest level since May 2008, before the financial crisis started to gather steam.

The Nasdaq Composite Index surged 66.54 points, or 2.17 percent, to 3,135.81, the highest since 2000 for the tech-heavy average.

Commodities also got a lift on hopes that the ECB's move may help its struggling members fight their debt woes.

Gold topped 1,700 dollars per ounce for the first time in six months after the news was announced, holding gains to the close and settling at 1,705.60 dollars per ounce.

Benchmark WTI oil gained 17 cents to end at 95.53 dollars per barrel on the New York Mercantile Exchange, after hitting 97.71 dollars a barrel earlier in the day.

Thursday's rally was triggered by a new round of bond-buying program. In a highly-anticipated speech after the ECB policy meeting, ECB President Mario Draghi unveiled a new bond-buying program dubbed "Outright Monetary Transactions (OMTs)", which will make open-ended purchases of short-term government bonds to keep borrowing costs down for struggling European countries.

The new bond-buying program will be "unlimited", according to the central bank chief, but strict and effective conditions will be attached to the program and the ECB would also seek the involvement of the International Monetary Fund to design country- specific conditions.

"OMTs will enable us to address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro," Dragi said.

Most economists believed the ECB's move was positive as it showed the willingness of the central bank to do whatever is needed to protect the region's economy.

"I think market participants will emphasize the open-ended nature of it (the new bond purchasing program)," Vincent Reinhart, chief U.S. economist with Morgan Stanley, told members of Council on Foreign Relations on Thursday. "That means, the bridge will be as long as it takes for politicians to build the infrastructure required to make it a more growable institution," he said.

However, some market participants predicted that the market will pull back after Thursday's rally amid so many uncertainties in implementing the program.

"I would focus more on other things that the ECB said its actions are conditional upon," said John P. Lipsky, former first deputy managing director of the International Monetary Fund.

"The ECB says we are willing to step up and do whatever it takes if country engages in the adjustable program but hasn't specified what it means. Second, will the ESM be ratified and will it be active in providing direct support to the banking system? The precondition to ECB action is a very critical issue," he added.

Kenneth Polcari, managing director of ICAP Equities and a veteran trader at the New York Stock Exchange, believed Thursday's rally was a "huge over-reaction" and stocks would pull back and " September will be a tough month" for Wall Street.