U.S. Stocks Cap Best Week in Two Months on Fed-Led Rally.

http://www.bloomberg.com/news/2014-12-19/u-s-stocks-cap-best-week-in-two-months-on-fed-led-rally.html

U.S. stocks surged the most this week since October as theFederal Reserve sparked a three-day rally that nearly wiped out two weeks of equity market pain.

The Standard & Poor’s 500 Index (SPX) jumped 3.4 percent in the five days, bringing some calm to the market after a seven-day slump erased about $1 trillion of equity value amid sinking crude prices and a worsening of the financial crisis in Russia.

The MSCI All-Country World Index rallied 2.3 percent for its best week since October. Energy shares in the S&P 500 climbed 9.7 percent, the most in three years. Commodity producers gave Europe its best gain of the year and sent Canada’s benchmark index to the biggest rally since 2009. The options gauge known as the VIX (VIX) sank 30 percent in the three days following the Fed meeting after having doubled in the previous seven days.

Equities rallied around the world after the central bank said it will be patient on the timing of a rate increase even as U.S. growth shows signs of accelerating. Chair Janet Yellen said any spillover from the situation in Russia is likely to be small, while the central bank’s policy statement didn’t mention turmoil sparked by tumbling oil prices.

“There was a sigh of relief as the contagion fear was vastly overblown and people came back to their senses,” Marshall Front, chief investment officer at Front Barnett Associates LLC, said by phone fromChicago. “The market is refocusing on profits and where the economy is going next year and that’s why the Fed’s comments were so supportive.”

Equity Rebound

The S&P 500 fell 5 percent over seven days from a record on Dec. 5, as crude prices plunged to five-year lows and the ruble sank to an all-time low even after Russia’s central bank unexpectedly boosted borrowing rates. U.S. crude rallied 4.5 percent on Dec. 19 to pare a weekly slide to 2.2 percent.

The U.S. equities gauge jumped 5 percent in the three days after the Fed statement, the most since 2011. Equity gains during the week’s final session erased the index’s loss this month, and left it 5 points below a record of 2,075.37 reached Dec. 5. The S&P 500 has advanced in each of the past six Decembers.

“This week, it was all about the Fed, oil prices and an economy that is not at all approaching anything like a recession,” Randy Bateman, the chief investment officer of Huntington Asset Advisors, which manages about $3.4 billion in the funds, said by phone. “Inflation seems benign still and it’s a Goldilocks market. The opportunity was set for the Fed to deliver and the market just exploded.”

Bull Market

American equities have almost tripled during the 5 1/2 year bull market driven by the central bank’s three rounds of bond buying to stimulate the economy and borrowing costs near zero.

The Stoxx Europe 600 Index posted its fifth weekly advance in six, ending the period with a four-day rally. The gauge surged 3 percent for its best gain since December 2013. Oil-and-gas producers rallied 7.7 percent in the week, the most since December 2011.

Canadian energy producers catapulted 13 percent higher, the most since 2009, to lead the benchmark S&P/TSX Index to its best week in more than five years.

In Asia, the Shanghai Composite Index (SHCOMP) climbed 5.8 percent to close at a four-year high. Japan’s Topix Index was little changed after the Bank of Japan maintained unprecedented stimulus, as Governor Haruhiko Kuroda’s bid to stoke inflation faces increasing challenges from the tumble in oil prices.

Chair Janet Yellen said any spillover from the situation in Russia is likely to be small, while the central bank’s policy statement didn’t mention turmoil sparked by tumbling oil prices.