* Bank of Japan to pump more funds into economy
* ISM services index climbs more than expected
* Materials, industrial shares lead broad rally
* Dow up 1.8 pct, S&P up 2.1 pct, Nasdaq up 2.4 pct
* For up-to-the-minute market news see []
(Updates with volume)
By Leah Schnurr
NEW YORK, Oct 5 (Reuters) - U.S. stocks rallied to nearly a
five-month high on Tuesday on growing conviction that central
banks will do even more to bolster struggling economies
worldwide.
The Bank of Japan lit the fuse overnight when it
unexpectedly cut rates closer to zero and said it would pour
money into the markets through asset purchases. This move came
as markets increasingly believe the U.S. Federal Reserve will
stimulate the world's largest economy in a similar fashion.
"The thinking today is that the printing of money is going
to take place," said Bucky Hellwig, senior vice president at
BB&T Wealth Management in Birmingham, Alabama.
"The short-term impact of that is to drive asset prices
higher. We've seen it almost across the board in commodities."
The likelihood of quantitative easing in the United States
hit the greenback and lifted commodity prices, while resource
stocks drove the S&P 500 through the 1,150 resistance level.
Crude oil hit a five-month peak near $83 a barrel and gold
hit another record high at $1,341.20 an ounce. The materials
sector <.GSPM> led the S&P 500, gaining 2.8 percent, with
mining company Freeport-McMoRan Copper & Gold <FCX.N> jumping
4.6 percent to $91.21.
Growing expectations of another round of quantitative
easing from the Fed have fueled enthusiasm for equities of
late. A top Fed official said in an interview published on
Tuesday that the central bank should do "much more" monetary
easing to spur a sluggish economic recovery. For details, see
[]
If the 1,150 level holds, the next resistance level for the
S&P 500 is seen around 1,170 to 1,175.
"It started off being a round number and now it becomes
more significant," said Frank Cappelleri, technical market
analyst and trader at Instinet in New York.
"Over the past few months, the market has seemed to respect
support and resistance more than before. So when one of those
levels is taken out, it seems to hold more significance than it
has in the past."
The Dow Jones industrial average <> gained 193.45
points, or 1.80 percent, to 10,944.72. The Standard & Poor's
500 Index <.SPX> rose 23.72 points, or 2.09 percent, to
1,160.75. The Nasdaq Composite Index <> jumped 55.31
points, or 2.36 percent, to 2,399.83.
FOLLOW THE RISING SUN
The Bank of Japan set the positive tone early on after it
cut its overnight rate target to virtually zero and pledged to
buy 5 trillion yen ($60 billion) worth of assets in a fresh
dose of economic stimulus. []
Additionally, Australia's central bank left interest rates
steady for a fifth month, thwarting expectations of a hike.
[]
Wall Street added to gains after the Institute for Supply
Management's index showed the pace of growth in the U.S.
services sector accelerated more quickly than forecast in
September, while hiring also picked up. []
Industrial shares also ranked among the day's winners, with
Dow components Boeing Co <BA.N> up 3.4 percent at $68.60, and
Caterpillar Inc <CAT.N> climbing 2.8 percent to $79.40.
Elsewhere, Walgreen Co <WAG.N> gained 2.6 percent to $33.98
after the drugstore chain posted an unexpected increase in
September same-store sales. []
About 8.77 billion shares traded on the New York Stock
Exchange, the American Stock Exchange and the Nasdaq, off from
last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on both the
NYSE and the Nasdaq by a ratio of slightly more than 4 to 1.
(Reporting by Leah Schnurr; Editing by Jan Paschal)
