NEW YORK, March 18 (Reuters) - U.S. stocks surged on Tuesday as investors overcame initial disappointment that the Federal Reserve cut its benchmark interest rate less than expected and focused on the likelihood of future cuts, driving the S&P 500 to its biggest percentage gain in more than five years.
Oil prices surged 3 percent, while the dollar reversed earlier losses and strengthened against the euro. And U.S. gold futures turned lower after the Fed slashed its target interest rate by three-quarters of a percentage point to to 2.25 percent.
The S&P 500 had its best daily percentage gain since October 2002, rising more than 4 percent. The technology-rich Nasdaq also jumped more than 4 percent for its biggest percentage gain since October 2003, while the Dow industrials jumped more than 400 points.
Earlier, European benchmark indexes gained more than 3 percent.
Investors had expected a cut of a full percentage point but analysts said the Fed's recent actions showed it was prepared to do what it takes -- such as its intermediation in the sale of investment firm Bear Stearns on Sunday -- to get its hands around a simmering global credit crisis.
Better-than-expected earnings from Wall Street banks Goldman Sachs (GS.N: Quote, Profile, Research) and Lehman Brothers (LEH.N: Quote, Profile, Research) also provided relief to the battered financial sector on both sides of the Atlantic.
"The Fed has shown that they are focused on getting the economy back on its feet first and foremost, and they will worry about inflation later," said K. Daniel Libby, senior portfolio manager at Sands Brothers Select Access Fund in Greenwich, Connecticut. Continued...
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