Stocks pull off late turnaround to end mixed
EmptyNEW YORK -- Wall Street pulled off a dramatic late-session turnaround to close mixed Thursday after bargain hunters lured by weeks of massive declines came back to the stock market. The Dow Jones industrials, down more than 340 points in afternoon trading, ended the day with a loss of just 13.
The market appeared to be on an almost relentless downward spiral after problems at Countrywide Financial Corp. confirmed investors' fears that credit problems are spreading. Moreover, for much of the day, investors shrugged off the Federal Reserve's injection of $17 billion into the banking system.
The revival showed that investors want to turn stocks around. The market clawed back with a bounce in blue chip stocks, with a leadership role going to the downtrodden financial sector.
But in spite of the big comeback, Wall Street is still an uncertain place, having been pounded by weeks of losses including triple-digit slides in the Dow. All three of the market's big indexes reached levels Thursday where they were down 10% from their mid-July highs -- the definition of a stock market correction.
"The fundamental buyers are coming back into the market, and typically trading in the last half hour of the day is where the smart institutional money is going," said Jack Albino, chief investment officer at Harris Private Bank. "There's a feeling that maybe we've pushed it too far, and this gives us a running start for positive markets worldwide on Friday."
Still, while the market has seen big gains over the past few weeks, those gains quickly evaporated the next day.
According to preliminary calculations, the Dow fell 15.69, or 0.12%, to 12,845.78.
The S&P rose 4.56, or 0.32%, to 1,411.26, and the Nasdaq composite index dropped 7.76, or 0.32%, to 2,451.07. The Russell 2000 index of smaller companies rose 17.29, or 2.30%, to 768.83.
Bonds continued their rally as investors fled into safer securities. The yield on the benchmark 10-year Treasury note dropped to 4.66% from 4.72% late Wednesday. Yields had been as low as 4.60% earlier in the session, but began to reverse as stocks rebounded.
Investors have also been hoping that policymakers might lower interest rates to help bolster the economy, which is a positive step for Treasurys. The likelihood of a rate cut before, or at, the next Fed meeting seemed less likely as the central bank instead chose to add more liquidity to the market.
The New York Fed -- which carries out the central bank's market operation -- announced an overnight repurchase agreement worth $12 billion. This was on top of a 14-day "repo" worth $5 billion announced before the market opened.
Central banks around the world have been supplying billions of funds to banks in the past week to make cash available for lending and keep interest rates from rising amid signs that credit was drying up. The Fed uses a repo to buy securities from dealers, who then deposit the money into commercial banks.
St. Louis Fed President William Poole told Bloomberg Television after the closing bell Wednesday it wasn't necessary for the central bank to consider lowering short-term interest rates before the regularly scheduled meeting of its rate-setting committee next month.
The Fed left rates unchanged at its last meeting at 5.25%, where it has stood since last summer. However, policymakers said during their commentary that inflation continues to be a worry, and also recognized the debt and credit crunch for the first time.