Stocks close up on stimulus hint

Stocks staged one of their strongest rallies of the year Tuesday, erasing a big decline from the day before, after a Federal Reserve official said he supported more measures to stimulate the economy.

The Dow Jones industrial average shot up 162 points, and every major category of stock in the U.S. market closed higher.

Charles Evans, president of the Fed's Chicago bank, told Bloomberg News he supported action to produce faster job growth, including having the Fed commit to super-low interest rates until unemployment falls significantly.

Investors have been worried about an escalating crisis in Europe over government debt and the health of banks, and U.S. job growth has been slower over the past three months than it was earlier in the year.

Rob Lutts, president and chief investment officer of Cabot Money Management, said investors were looking for an excuse to buy. "The question for [Fed chief Ben] Bernanke is, Should he add more medicine when he's already doped up the patient enough already?" he said.

The Dow rose 162.57 points, or 1.31 percent, to close at 12,573.80. The Standard & Poor's 500 index was up 1.17 percent to 1,324.18, and the Nasdaq composite rose 1.19 percent to 2,843.07. -- AP