Buyers returned to Wall Street today after two days of heavy losses as investors, while mindful of the economy's growing problems, looked...
NEW YORK — Buyers returned to Wall Street today after two days of heavy losses as investors, while mindful of the economy’s growing problems, looked for beaten-down stocks.
At the close, the Dow Jones industrial average was up 248.02, or 2.9 percent, to 8,943.81.
The broader Standard & Poor’s 500 index added 25.87, or 2.9 percent, to 930.75, and the Nasdaq composite index rose 38.70, or 2.4 percent, to 1,647.40.
Stocks closed at their high of the session in light trading as investors showed relief that a bad report on unemployment wasn’t worse. The market briefly came off its highs after President-elect Obama reiterated that there is a great deal of hard work to be done to restore the economy to health.
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The indexes are still showing heavy losses for the week after a 10 percent decline over Wednesday and Thursday.
Today’s economic and corporate news reminded the market that the country could be in for a deep and protracted recession.
The Labor Department said the nation’s employers cut 240,000 jobs in October, hurtling the U.S. unemployment rate to a 14-year high of 6.5 percent. The market had expected employers to cut 200,000 jobs and for the unemployment rate to rise 6.3 percent.
Meanwhile, Ford reported a $129 million third-quarter loss and announced plans to cut more than 2,000 additional white-collar jobs. General Motors said it lost $2.5 billion in the quarter and warned that it could run out of cash in 2009. The struggling automaker also said it has suspended talks to acquire Chrysler.
Although the day’s news was worse than expected, investors were drawn by prices beaten down in the past two sessions.
“We’re coming off of a very oversold market that had already braced itself for bad news out of Detroit and certainly bad economic data in terms of the labor report,” said Peter Cardillo, chief market economist at Avalon Partners.
The market appeared, at least for one session, to be repeating a recent pattern of rebounding after a huge loss — a pattern that analysts warned would prevail in trading for some time to come.
Obama’s election to the White House was preceded by a big rally, during which the benchmark Standard & Poor’s 500 index surged 18.3 percent in six sessions through Tuesday. This was followed by a two-day loss of about 10 percent in the major indexes, including a 929-point drop in the Dow, as investors turned their focus once more to the economy’s woes.
“There are three factors that are driving this market: psychological, fundamental and technical,” Smith said. “The psychological is fear and panic. We’ve certainly seen that.”
The fundamental factor is investors don’t know exactly how the current credit crisis is going to affect the economy. And the technical factor that is playing into the market is the forced selling from hedge funds and mutual funds that have to raise cash for redemptions, Smith said.
Nov. 15 is the cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end, which means a sudden influx of “sell” orders could force funds into dumping more investments. Analysts expect this to continue to add to the volatility in the market.