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Banks jump as Wall St rallies ahead of Fed

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US stocks have rallied broadly, led by energy and financial shares as crude oil prices rose and before Wednesday’s interest rate decision from the Federal Reserve.

Higher underlying inflation in November cemented market bets that the Fed will raise rates after their meeting.

Bank stocks, which will benefit from higher rates, led the market with a 2.7 per cent advance on the S&P financial sector index.

Goldman Sachs’ 3.7 per cent rise provided the biggest boost to the Dow industrials. JPMorgan, Morgan Stanley, Citigroup and Bank of America were each up more than 3 per cent.

The S&P energy sector also rose 2.7 per cent, which tracked the near 3 per cent advance in US crude and Brent.

Exxon powered the S&P 500 with a 4.4 per cent rise, while Chevron rose 4 per cent after crude prices recovered from their steep fall on Monday.

Investors have come to terms with the Fed’s anticipated rate rise decision, said Joseph Benanti, managing director, sales and trading at Rosenblatt Securities in New York.

“The economy is getting a little bit better and raising rates does not mean the market is going lower; it’s actually a positive sign,” he said.

The Dow Jones industrial average rose 215.03 points, or 1.24 per cent, to 17,583.53, the S&P 500 gained 28.42 points, or 1.41 per cent, to 2,050.36 and the Nasdaq Composite added 63.66 points, or 1.29 per cent, to 5,015.88.

Valeant shares were up 18.6 per cent at $US112.72 after the Canadian drugmaker signed a distribution deal with Walgreens.

Dow component 3M was down 6.2 per cent at $US147.87 after cutting its 2015 profit outlook.

Qualcomm was up 3.2 per cent at $US48.35 after the company raised its first-quarter earnings forecast and decided against separating its chipmaking and technology licensing businesses.

Advancing issues outnumbered declining ones on the NYSE by 2,458 to 653, for a 3.76-to-1 ratio on the upside; on the Nasdaq, 2,062 issues rose and 768 fell for a 2.68-to-1 ratio favouring advancers.

The S&P 500 posted eight new 52-week highs and seven new lows; the Nasdaq recorded 29 new highs and 126 new lows.