Investors made a stunning recovery today, as the Dow Jones finished up just under 300 points.
Wall Street pulled off a stunning comeback Wednesday, 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 under 300 points, according to preliminary calculations…
The Fed’s decision Tuesday to lower its federal funds rate by the wide margin of 0.75 percentage point to 3.5 percent has been met with some skepticism, but perhaps gave intrepid investors a reason to buy the severely dented stocks in the financial sector. 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.
Moreover, the billions of dollars in mortgage-related losses suffered by the financial companies contributed to months of selling on Wall Street.
Citigroup Inc. rose $2.40, or 10 percent, to $26.80, and another Dow component, JPMorgan Chase & Co., rose $5.09, or 12.5 percent, to $45.95.
“If it wasn’t for Bernanke giving an HGH shot to the market this is what we should have done yesterday. We should have corrected yesterday,” said Peter Boockvar, equity strategist at Miller Tabak.
While Apple posted record earnings from its sales of iPods and iPhones, the company’s 2008 outlook came in well below analysts’ expectations — an indication that the tech giant may take a hit if the U.S. enters a recession.
The most surprising part of today’s earlier sell-off is that Wall Street got what it wanted most yesterday: an aggressive 0.75% interest rate slash from the Federal Reserve. That rate cut eased some fears and helped the market avoid enormous losses some had predicted.
Oil fell an additional $2.20, bringing it down to $87.01 per barrel.
by Stephan Tawney on January 23, 2008