Dow Jones: 11,176.76 (+322.11) Nasdaq: 2,446.06 (+100.68) SP 500: 1,162.35 (+38.53):US STOCKS rallied yesterday, driving the Standard and Poor's 500 Index up from the cheapest valuations since 2009, as weaker-than-estimated economic data reinforced optimism the Federal Reserve will act to spur economic growth.

Financial shares reversed losses after the Federal Deposit Insurance’s list of “problem” banks shrank for the first time since 2006.

“There’s plenty of evidence that the economy has slowed,” Kevin Caron, market strategist in Florham Park, New Jersey, at Stifel Nicolaus, said. His firm has more than $115 billion in client assets.

“The speculation would be that it’s possible that the Fed will say something designed to calm markets and provide a bit of encouragement,” he said.

The Dow Jones industrial average was up 322.11 points, or 2.97 per cent, at 11,176.76.

The Standard Poor’s 500 Index was up 38.53 points, or 3.43 per cent, at 1,162.35.

The Nasdaq Composite Index was up 100.68 points, or 4.29 per cent, at 2,446.06.

Equities rose after the Fed Bank of Richmond’s business activity index fell to minus 10 in August, the weakest since June 2009.

The four-week global equity rout has erased $8 trillion from share values as Europe’s debt crisis and worsening economic reports raised concern the global economic recovery is faltering.

Monsanto rallied 5.5 per cent to $68.86. Chevron gained 4.2 per cent to $97.19.

Microsoft added 2.9 per cent to $24.68.

Sprint surged 10 per cent, the most since May 2010 on a closing basis, to $3.59.

Verizon Communications rose 2.7 per cent to $35.76.

ATT climbed 1.3 per cent to $28.82.

Bank of America pared its loss to 3.9 per cent from 6.4 per cent, trading at $6.17.

Financial institutions in the SP 500 tumbled 25 per cent in 2011 through Monday, the most among 10 groups, amid speculation the government debt crisis in Europe will spur banking losses.

Goldman Sachs and Bank of America slumped 37 per cent and 52 per cent, respectively, the most since 2008, this year through Monday. – (Bloomberg/Reuters)