- Associated Press - Tuesday, March 13, 2012

NEW YORK — Bank stocks turbocharged a rally across the financial markets Tuesday, and all three major stock indexes posted their biggest gains of the year. The Dow Jones industrial average rose 218 points and closed at its highest level since the end of 2007.

The Nasdaq composite closed above 3,000 for the first time since December 2000, when dot-com stocks were collapsing.

There was already plenty of good news driving the market higher Tuesday — the strongest retail sales gain since September and an encouraging assessment of the economy from the Federal Reserve.

Then the market soared in the final hour after JPMorgan Chase, the country’s largest bank by assets, announced that it plans to buy back as much as $15 billion of its stock and raise its quarterly dividend by a nickel to 30 cents per share.

“That’s what really made the day,” said Jeffrey Kleintop, chief market strategist at LPL Financial.

JPMorgan Chase stock gained 7 percent, and other banks followed. Citigroup and Goldman Sachs gained 6 percent. Banks were easily the best-performing stocks in the market, gaining almost 4 percent as a group.

The announcement came just before the Fed made a surprise announcement of the results of its annual stress test for banks. JPMorgan Chase and 14 other financial institutions passed. Four, including Citigroup, failed.

The Fed had planned to release the results on Thursday afternoon. But it moved up the announcement after JPMorgan declared its dividend increase. The bank said it had the Fed’s blessing to raise the dividend.

Citigroup stock was down 4 percent in after-hours trading following the Fed announcement.

The Dow finished at 13,177.68, its highest close since the last day of 2007. The close put the Dow within 1,000 points of its all-time record, 14,164.53, set less than three months earlier.

All 30 stocks in the Dow closed higher.

The Nasdaq composite index rose 56.22 points, or 1.9 percent, to 3,039.88. The last time the Nasdaq closed above 3,000, it was on its way down fast. The index peaked above 5,000 in March 2000 and bottomed just above 1,100 two and a half years later.

Jack Ablin, chief investment officer at Harris Private Bank, said the key difference between the Nasdaq then and now is that the technology companies that dominate the index only promised profits 12 years ago.

Today those profits are real, and massive. The Nasdaq’s largest companies are Apple, Microsoft and Google.

“The Nasdaq hasn’t done much of anything for 12 years, but it’s had a huge rally in earnings,” Ablin said.

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