Wall Street launched a massive rebound today, sending the Dow Jones industrial average up more than 500 points after driving it below the...
NEW YORK — Wall Street launched a massive rebound today, sending the Dow Jones industrial average up more than 500 points after driving it below the 8,000 mark, as investors decided they did not want to miss out on buying stocks at cheap prices.
At the close, the Dow was up 552.59, or 6.7 percent, at 8,835.25, after falling as low as 7,965.42. The Dow did not sink below its Oct. 10 trading low of 7,882.51.
The Standard & Poor’s 500 index rose 58.99, or 6.9 percent, to 911.29, after dropping to 818.69 at midday, well below its intraday low of 839.80 on Oct. 10. At that point, share prices started to take off.
The Nasdaq composite index rose 97.49, or 6.5 percent, to 1,596.70.
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After three days of selling that wiped out about $1 trillion in shareholder value, many investors, though nervous about the economy, believed 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.”
The stock market’s initial sell-off began after the Labor Department reported that the number of newly laid-off individuals seeking unemployment benefits jumped last week to a level not seen since just after the Sept. 11, 2001, terrorist attacks.
And there were more signs of a severe pullback in consumer spending, a troubling trend that had pummeled stocks earlier in the week. Wal-Mart trimmed expectations for full-year earnings, and Intel late Wednesday cut more than $1 billion from its sales forecast, providing more evidence that few industries are safe from a clampdown on spending by businesses and consumers alike.
But then the S&P lifted above its Oct. 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 that the government will have a hard time financing its costly bailout.
Hogan called it a “great sign” that the S&P recovered after falling below its Oct. 10 trading lows. “Historically, if you test a low within 45 days and close above it, it’s very bullish,” he said.
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.
Oil rose $2.08 to settle at $58.24 a barrel on the New York Mercantile Exchange. Crude earlier dipped as low as $54.67, a price last seen in January 2007.
Overseas, Japan’s Nikkei closed down 5.25 percent and the Hong Kong Hang Seng fell 5.15 percent. In European trading, London’s FTSE 100 was down 0.31 percent, Germany’s DAX rose 0.62 percent, and France’s CAC-40 added 1.10 percent.