World Economic

new york — Stocks rallied the most in five years on Tuesday as earnings from Lehman Brothers Holdings Inc. and Goldman Sachs Group Inc. allayed concern investment banks are collapsing and the Federal Reserve cut its benchmark rate.

Lehman, the fourth-biggest securities firm, had its steepest advance ever and helped lead financial stocks to their biggest gain since 2000. Goldman, the largest securities firm, rallied the most in almost nine years. All 10 industry groups in the Standard & Poor’s 500 index added at least 1.7 percent after the Fed cut the target rate for overnight lending by 0.75 percentage point, helping the market erase a two-day tumble that wiped out $767 billion after Bear Stearns Cos.’s collapse.

The S&P 500 rose 54.14 points, or 4.2 percent, to 1,330.74, its biggest rise since October 2002. The Dow Jones industrial average climbed 420.41, or 3.5 percent, to 12,392.66, its fourth-biggest point gain ever. The Nasdaq composite index increased 91.25, or 4.2 percent, to 2,268.26. Treasuries dropped and the dollar surged the most in nine years against the yen.

Financial shares in the S&P 500 gained 8.5 percent as a group, the top advance among 10 industries. Goldman surged $24.57, or 16 percent, to $175.59. Lehman climbed 46 percent to $46.49.
Citigroup Inc. advanced $2.09 to $20.71. JPMorgan Chase & Co. gained 6 percent. Merrill Lynch & Co. added 13 percent.

Bear Stearns, which lost 84 percent Monday, climbed 23 percent to $5.91 on speculation the company may receive a higher offer easy payday loans creditreport. JPMorgan’s $240 million bid was a 90 percent discount to Bear’s closing price at the end of last week.

Exxon Mobil Corp. increased $2.68 to $88.47 as oil recovered some of Monday’s 4.1 percent retreat. Chevron Corp. added $1.93 to $86.12. Crude oil for April delivery rose 3.5 percent to $109.42 a barrel in New York on speculation the interest rate reduction will strengthen the economy.

General Motors Corp. climbed $1.58 to $19.41. The largest U.S. automaker has enough cash and doesn’t expect any fallout from its ties to Bear Stearns, Chief Operating Officer Fritz Henderson said.

Yahoo Inc. added $1.81, or 7 percent, to $27.66. The Internet search company that snubbed advances from Microsoft Corp. reaffirmed its forecasts for the first quarter and the year in a bid to prove it can stay independent. Cash flow may almost double in the next three years, Yahoo said.

A measure of house builders in the S&P indexes climbed the most in almost eight weeks, gaining 9.9 percent.

The Fed has cut the benchmark lending rate by 2 percentage points this year, the most aggressive easing since the federal funds rate became an explicit target of policy in the late 1980s.

The S&P 500 has dropped 9.9 percent since Sept. 17, the day before the Fed cut its benchmark lending rate for the first time in four years.

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