Wall Street stages comeback
Wall Street pulled off a stunning comeback today, surging higher in late trading and wiping out what looked to be yet another precipitous decline.
The Dow Jones industrials, down more than 323 points in earlier trading, ended the day with an advance of just less than 300 points, according to preliminary calculations.
While such volatility has become a hallmark of Wall Street's performance in recent months amid the ongoing housing and credit crisis, analysts saw some positive signs in the day's trading.
"There does come a point and time when the market itself recognises that it got out of hand, and that is when bargain hunters can come in," said Peter Cardillo, chief market economist at Avalon Partners.
The Fed's decision yesterday to lower its federal funds rate by 0.75% to 3.5% has been met with some scepticism, but it gave intrepid investors a reason to buy the severely dented stocks in the financial sector.
"You might say this is a belated reaction to what the Fed did this week, compounded by hopes for the Fed to do more next week," Cardillo said.
Traders who bet on the Fed's target fed funds rate were pricing in on a 100%chance of a 0.50% cut by the central bank when it meets next week.
Rate cuts will eventually boost margins for banks and other lenders, which have been working to lower costs and boost cash levels through layoffs and stock sales. Those companies - like Citigroup Inc., Washington Mutual Inc. and Merrill Lynch - were the big winners today.
Moreover, the billions of dollars in mortgage-related losses suffered by the financial companies contributed to months of selling on Wall Street.
The Dow Jones industrial average rose 298.98, or 2.50%, to 12,270.17.
Broader stock indicators also surged. The Standard & Poor's 500 index rose 28.10, or 2.14%, to 1,338.60, while the Nasdaq composite index rose 24.14, or 1.05%, to 2,316.41.
