After day of tumult, Dow closes up 430 points

NEW YORK: In another wild day on Wall Street, stocks climbed, then dropped, then rocketed as traders did a double take on the Federal Reserve’s much-awaited statement on the economy Tuesday afternoon.

The Fed announced that while it would not be coming to the rescue with some new program to stimulate the economy, it would leave interest rates unchanged for a couple of years.

That sent stocks tumbling — until traders figured out that locked-in interest rates and cheap credit could actually give the economy a more solid footing. Minutes after the 2:15 p.m. announcement, the Dow Jones industrial average sped downward 1.7 percent. But stocks soon made a U-turn and roared through the rest of trading. For the day, the Dow rose 429 points, or 3.98 percent, to close at 11,239.77. The broader Standard & Poor’s 500-stock index rose 4.7 percent to 1,172.53.

It was the biggest daily gain in both indexes since March 2009, and followed the carnage of Monday’s 6.7 percent S.& P. sell-off, the biggest loss since the height of the financial crisis in late 2008.

Following the initial disappointment in the Fed’s statement, the move seemed significant: after already cutting the short-term federal funds rate to virtually zero, the Fed was effectively telling investors it was now going to keep two-year bond rates close to zero as well. As that interpretation spread through markets, investors realized it could provide a big stimulus to the economy and, with bond yields tumbling quickly as a result, encourage investors to hold stocks.