Wall Street pulls off dramatic turnaround
NEW YORK » Wall Street pulled off a dramatic late-session turnaround to close mixed yesterday 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 15.
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, and appeared to be angling for a rate cut instead.
The market clawed back with a bounce in blue chip stocks, with a leadership role going to the downtrodden financial sector.
In spite of the big comeback, most of which came in the final hour of trading, 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 yesterday where they were down 10 percent from their mid-July highs -- the definition of a stock market correction.
Some analysts were hopeful.
"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 Ablin, 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.
The Dow fell 15.69, or 0.12 percent, to 12,845.78.
The Standard & Poor's 500 rose 4.57, or 0.32 percent, to 1,411.27, and the Nasdaq composite index dropped 7.76, or 0.32 percent, to 2,451.07. The Russell 2000 index of smaller companies rose 17.29, or 2.30 percent, to 768.83.
Bonds continued their rally as investors fled to safer securities. The yield on the benchmark 10-year Treasury note dropped to 4.66 percent from 4.72 percent late Wednesday. Yields had been as low as 4.60 percent earlier in the session, but began to reverse as stocks rebounded.
Advancing issues outpaced decliners by a 2 to 1 basis on the New York Stock Exchange, where volume came to a record 6.13 billion shares, up from 4.31 billion Wednesday.
Light, sweet crude fell $2.33 to $71 per barrel on the New York Mercantile Exchange.
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.
Countrywide fell $2.34, or 11 percent, to $18.95 after the mortgage lender borrowed $11.5 billion from a group of 40 banks to fund loans, in a move that shows just how deep the lending crisis has become.