US stocks bounce back
Wall Street launched a massive rebound today, muscling the Dow Jones industrial average up nearly 553 points after driving it down near its lows for the year, as investors decided they did not want to miss out on cheap stocks.
After three days of selling which wiped out about 1 trillion dollars in shareholder value, many investors, though nervous about the economy, appeared convinced the market had priced in enough bad news. So when the Standard & Poor’s 500 index managed to recover from multiyear trading lows, investors swarmed back in.
“It’s a herd mentality,” said Ryan Larson, senior equity trader at Voyageur Asset Management. “We started going higher – and you don’t want to be the last one on the boat.”
Some analysts also said investors were positioning themselves ahead of a meeting of Group of 20 leaders in Washington. The meeting could bring decisions on mending the troubled global financial system.
There was “some anticipation that we’ll hear some good news from that meeting”, said Jack A Ablin, chief investment officer at Harris Private Bank. Today’s rally was “part hopeful, part technical. But certainly welcome.”
Stocks sold off early in the day after the Labor Department said the number of newly laid-off individuals seeking unemployment benefits jumped last week to the highest level since right after the September 11, 2001 terrorist attacks.
There was also more evidence of a severe pullback in consumer spending – a worsening trend which had pummelled stocks earlier in the week.
Wal-Mart Stores Inc trimmed expectations for full-year earnings, and Intel Corp cut more than 1 billion dollars from its sales forecast late yesterday.
But then the S&P lifted above its October 10 trading lows, and a Treasury auction of 30-year bonds got decent demand from both domestic and foreign buyers, said Arthur Hogan, chief market analyst at Jefferies & Co.
The auction results alleviated some fears about the government having a hard time financing its costly bailout.
As stocks rallied, so did oil prices, sending shares of energy companies higher - the biggest gainer among the 30 Dow companies was Chevron Corp, which rose 8.43 dollars, or 12.5%, to 75.71 dollars.
Many analysts had predicted the market would retest the multiyear lows it reached last month. They also still forecast volatility for some time to come, as Wall Street tries to rebuild from October’s devastating losses and gauge the severity of the economy’s downturn.
During past recoveries from bear markets, a great deal of turbulence in the market became commonplace – so it is possible that today’s gains will be erased if more gloomy reports pour in.
But Mr Hogan called the market’s resiliency a “great sign”.
According to preliminary calculations, the Dow rose 552.59, or 6.67%, to 8,835.25, after falling as low as 7,965.42 and rising as high as 8,876.59 – a trading range of 911 points. The Dow did not sink below its October 10 trading low of 7,882.51.
The Standard & Poor’s 500 index rose 58.99, or 6.92%, to 911.29, after dropping to 818.69 – well below its intraday low of 839.80 on October 10.
The Nasdaq composite index rose 97.49, or 6.50%, to 1,596.70.
