Stocks, Commodities Rally on Fed Stimulus Plan (Stephen Kirkland and Rita Nazareth)

Nov. 4, 2010 (Bloomberg) -- Stocks surged, sending the MSCI World Index to a two-year high, and commodities rallied after the Federal Reserve announced plans for more bond purchases and earnings beat analyst estimates. The dollar sank and two- and five-year Treasury yields touched record lows.

The MSCI World gained 2.4 percent at 4 p.m. in New York. The Standard & Poor’s 500 Index climbed 1.9 percent to 1,221.06, its highest since September 2008, as banks rallied amid speculation they will be allowed to raise dividends. The Dollar Index fell 0.8 percent to an 11-month low. The S&P GSCI commodities index added 2.3 percent as gold jumped to a record high. Irish 10-year notes slid for an eighth day, the longest streak of declines in 23 months.

Fed Chairman Ben S. Bernanke’s $600 billion bond-buying program reinforced optimism the world economy won’t deteriorate and corporate profits will improve. The Bank of England said it kept a 200 billion-pound ($324 billion) asset-purchase plan and the European Central Bank left rates at a record low today. BNP Paribas SA, the world’s biggest bank by assets, reported a 46 percent jump in third-quarter profit, and Qualcomm Inc., the largest maker of mobile-phone chips, forecast higher earnings.

“It’s called the Bernanke put,” said Stephen Wood, the New York-based chief market strategist for Russell Investments, which manages $140 billion. “The Fed wants to put a floor under the employment market and asset prices. You’re seeing that being reflected in both stock and commodities markets. Risk assets are attractive globally.”

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