THE Dow Jones industrial average soared to its second biggest point gain ever yesterday amid a powerful rally in the bond market.
A surprise drop in the US trade deficit sent the dollar higher, while tight supplies and frigid weather in the central United States sent oil and gas prices soaring.
In the stock market, the 30-stock Dow ended up 126.87 points, or 2 per cent, at 6,473.64, its biggest rise since the blue-chip index rose 184.86 on October 21st, 1987 - two days after crashing 508 points.
"This may be the start of the Santa Claus rally," said Mr Richard Cripps, chief market strategist at Legg Mason Wood Walker.
Yesterday's US economic reports, including a downbeat report from the Philadelphia Federal Reserve's business conditions survey for its region and a surprising rise in new jobless claims, sparked a big jump in long-term bonds and a drop in interest rates.
"The big surprise today was the decline in the Philly Fed survey," said Mr Hugh Johnson, chief investment officer at First Albany. "That was important because it was our first look at December numbers and it told us the economy was slower than in November," he said.
A slowing economy would reduce chances that the Federal Reserve would need to raise interest rates any time soon.
The Irish market failed to respond to strong gains in London and on Wall Street and only moved ahead slightly. The market responded well to Irish Life's $163 million (just under £100 million) acquisition in the US and Waterford Wedgwood's investment in the German china manufacturer Rosenthal.