Stocks Rocket on Rate Cut Hopes

Stocks had their best day of the year and their best two-day gain in five years after weak economic reports and dovish comments from Federal Reserve Vice Chairman Donald Kohn gave investors hope that the Fed will cut interest rates when it meets Dec. 11.

Investors still have to hear from Fed chairman Ben Bernanke on Thursday, but they heard enough in Kohn’s comments about growing financial risks that they were willing to place their bets a day early. Also helping stocks was Freddie Mac’s efforts to shore up capital, which sent its stock and the rest of the beleaguered financial sector soaring.

The Nasdaq led the major indexes with a 3.2% gain, with Intel, Dell, Research In Motion and Sun among the names gaining 4% or more. Dell will release its quarterly results after the close on Thursday, and analysts are looking for a 6.7% sales gain to $15.34 billion and earnings of 35 cents a share, according to Thomson Financial.

VMware and Baidu.com were other big gainers, up 13% and 7.6%, respectively.

Amazon gained more than 5% on reports of strong holiday sales. Overstock jumped 15% on an upgrade, but Bidz.com plunged for a second day on allegations of shill bidding by Citron Research, which the company denied.

Verigy soared 28% after the chip testing equipment company’s quarterly results beat estimates, while Sycamore and Marvell slumped on their numbers.

The Nasdaq soared 82 to 2662, the S&P gained 40 to 1469, and the Dow surged 331 to 13,289. Volume rose to 4.53 billion shares on the NYSE, and 2.52 billion on the Nasdaq. Advancers led by a 29-4 margin on the NYSE, and 23-6 on the Nasdaq. Upside volume was 94% on the NYSE, and 88% on the Nasdaq. New highs-new lows were 60-162 on the NYSE, and 73-163 on the Nasdaq.

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