Wall Street turned in another stunning finish, extending its unprecedented streak of volatility — this time, to the upside — with the Dow making a 780-point swing during the session.
NEW YORK — Wall Street turned in another stunning finish today and extended its unprecedented streak of volatility — this time, to the upside — with the Dow Jones industrial average making a 780-point swing during the session.
The Dow closed up 401.35, or 4.7 percent, at 8,979.26, after falling 380 points in the opening minutes of the session.
Microsoft, one of the 30 Dow stocks, gained $1.53, or 6.8 percent, to close at $24.19 a share. Boeing, also a Dow stock, soared $2.55, or 6 percent, to $44.88.
Broader stock indicators also were higher. The Standard & Poor’s 500 index gained 38.59, or 4.3 percent, to 946.43, and the Nasdaq composite index rose 89.38, or 5.5 percent, to 1,717.71.
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A rise in shares of Yahoo over renewed speculation it could cement a deal with one-time suitor Microsoft helped push the technology-heavy Nasdaq higher. Yahoo advanced $1.24, or 10.6 percent, to close at $12.99.
It is clear that investors are reacting in the extreme to negative economic news, including disappointing numbers today on industrial production. But traders are also reacting to the market’s declines, and were piling in to buy late in the session.
Analysts expect this extraordinary volatility to continue, and warned that just as Monday’s huge 936-point surge in the Dow was overdone, there was little reason to trust that today’s gains would hold.
Stocks spent much of the session seeking a direction after the previous session’s steep dive, and for a time turned lower after a disappointing report this morning on manufacturing. Wednesday’s drop, which took the Dow down 733 points, followed a stream of bad economic news that underscored the likelihood that the country is either in a recession or will be in one — and that the downturn could be severe.
It was clear from today’s trading that the market will continue having extreme reactions to any economic news.
“I don’t think the markets have a clear sense about the economic environment as of yet. They’re clearly nervous,” said Subodh Kumar, global investment strategist at Toronto-based Subodh Kumar & Associates.
Investors initially appeared cheered by a better-than-expected reading from the Labor Department on consumer prices. The flat reading on September’s Consumer Price Index (CPI) compares with August’s 0.1 percent decline, which was the first in nearly two years. The core index, which eliminates food and energy prices, rose 0.1 percent. Economists had been expecting CPI would rise to 0.1 percent and that core CPI would increase 0.2 percent. Investors are relieved to see any economic pressures ease on consumers.
Meanwhile, a weekly snapshot of the job market showed that first-time claims for unemployment benefits declined last week. The Labor Department said new claims fell 16,000 last week to a seasonally adjusted level of 461,000 — below the 475,000 that had been anticipated. Still, total unemployment remains above the level that economists often associate with recession.
But the Philadelphia Federal Reserve said regional manufacturing conditions weakened in October. The bank’s regional index came in at a negative 37.5 compared with a positive 3.8 for September.
Kumar said markets are jittery because many investors’ expectations about the economy were too rosy heading into the summer and the monthlong freeze in the credit markets has dealt the economy another blow, making it harder and more expensive for many businesses and consumers to get loans.
He said the volatility buffeting the markets reflects investors tinkering with their portfolios to match their more sober take on the health of the economy and some investors simply cashing out. That means some vehicles like mutual funds and hedge funds are entering a market already short on buyers and being forced to sell.
Because of investors’ great anxiety about the economy, Wall Street is expected to remain extremely volatile, as it has been since last month when the credit markets tightened and stocks plunged. The gyrations this week have been particularly intense, with the Dow industrials soaring 936 points Monday and falling 733 Wednesday following a weak report on retail sales and a disheartening assessment of the economy from the Federal Reserve.
Indeed, the Wall Street’s fear gauge rose to a record level today. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose to an all-time intraday high of 81.17, its first-ever move over 80, before settling at 67.25. The VIX, which usually trades below 50, tracks options activity for the companies that make up the S&P 500.
Light, sweet crude for November delivery fell $4.69 to settle at $69.85 a barrel on the New York Mercantile Exchange. On Wednesday, crude settled at $74.54, its lowest close since Aug. 31, 2007.