Dow Retakes 9000 in Furious Rally
Jittery consumers and plunging home prices weren't enough to keep the stock market in check Tuesday. In fact, it soared despite them as investors bet that share prices have been adequately slashed to reflect such economic pitfalls.
The Dow Jones Industrial Average leapt 889.35 points, or 10.9%, to 9065.12, aided by gains in all 30 of its components. The rally was the Dow's second-best this month, ranking behind only the record 936-point leap on Oct. 13 to break an eight-day losing streak that essentially constituted a slow-motion crash.
Reuters Traders work on the floor of the New York Stock Exchange October 28, 2008. U.S. stocks rose at the open on Tuesday as investors snapped up beaten-down shares and bet that credit markets would see a further thaw, overshadowing worries about the global recession. Rallies in overseas shares and favorable news at Boeing and General Motors boosted market participants' mood early in the session. That enthusiasm briefly wavered after the release of downbeat economic data, but came roaring back as the closing bell approached, with buyers rushing in either to rebalance beaten-down portfolios or to place speculative bets at bargain-level prices.
"People are starting to take a long-term view, and the long-term looks pretty good," said Anthony Conroy, head trader at BNY ConvergEx, a New York brokerage.
Alluding to the Dow's steep decline from it's year-ago record, he said: "If you went to Macy's and you saw that all the merchandise was 45% off, people would be buying like crazy. That's what's going on in the stock market right now."
Heading into the end of October, the Dow has plunged 17%, on track to register as the worst month in its history. But that plunge has whetted bargain hunters' appetites and forced some money managers whose funds are required to hold a certain percentage of money in stocks to come back into the market as the time approaches to mail month-end statements.
Despite Tuesday's gains, some participants remain concerned that trading volume has been light, making it difficult to gauge investors' level of conviction that the gains can continue. Exchange-only volume at the New York Stock Exchange on Tuesday struggled to reach the month-to-date average of 1.7 billion shares.
Although it didn't happen Tuesday, the stock market lately has often been plagued by forced selling among hedge-funds and other deep-pocket players, who have to raise cash to cover margin calls as the market goes down. While such activity has often produced avalanches of selling lately, some veteran investors are still looking for a one-time market plunge, accompanied by big volume, to confirm that the forced selling has truly run its course, paving the way for a more sustained rally.
"There are still people hanging on by their fingernails who need to be moved into the sell column," said Michael Farr, president of the Washington money-management firm Farr, Miller & Washington. "I'm a buyer in waiting. I know what I want to buy, but I haven't seen the wash-out that I want to see first."
An overnight surge in Asian and European stocks set an upbeat tone prior to the opening bell in New York. Rebounding from a round of painful losses in the previous session, Hong Kong's Hang Seng Index leapt 14.4% and Tokyo's Nikkei 225 Index climbed 6.4%.
The S&P 500 was up 10.8% to end at 940.51. All its sectors were higher, led by financials, up 15.7%. Technology rose 13.9%, and basic materials gained 12.6%. Industrials, utilities, and consumer-discretionary were up about 10% each.
The technology-focused Nasdaq Composite Index rose 9.5% to 1649.47. The Russell 2000 was up 7.6% to 482.55.
The feverish stock rally took place against a backdrop of glum economic data. The Conference Board said its consumer-confidence index fell to a reading of 38 in October, a record low that was also far worse than the average forecast of economists for a reading of 51.5.
Following its late-morning release, the consumer-confidence report pushed stocks close to break-even. But a feverish rally ensued starting around 2 p.m. Eastern.
Separately, a closely watched index of home prices fell by its steepest ever annual rate in August. The Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 percent from August last year, the largest drop since its inception in 2000.
Traders also kept a close eye on the Federal Reserve, whose interest-rate committee began a two-day meeting in Washington on Tuesday. Most market participants expect a half-point cut in the Fed's key rate target, which now stands at 1.5%.
The Fed's counterparts around the world are also weighing further moves to prop up their respective economies. European Central Bank Jean-Claude Trichet said Monday that another Europe rate cut was "possible," and Bank of England Governor Mervyn King recently admitted for the first time that the United Kingdom was likely in recession. 离心泵Troubled Iceland on Tuesday raised its interest rates by six percentage points to 18%.
Currency moves by Australia, as well as reports that Singapore and Malaysia also intervened to help their currencies, also cheered investors. Japan moved up its restrictions on so-called naked short-selling by a week.
The dollar weakened against the euro and British pound but strengthened against the Japanese yen. The U.S. Dollar Index, which measures the greenback's value against a basket of six foreign denominations, was down 1%.
Oil futures slipped 49 cents, or 0.8%, to $62.73 a barrel in New York. Gold contracts slipped $2.40, or 0.3%, to $739.30 per ounce. The broad Dow Jones-AIG Commodity Index rose 0.3%.
Treasury prices fell. The two-year note was off 3/32, yielding 1.581%. The benchmark 10-year note slipped 1-14/32 to yield 3.860%.