Wall Street had another astounding advance Tuesday, with the Dow Jones industrials soaring nearly 900 points in their second-largest point gain ever as late-day bargain hunters stormed into the market. The Dow and the Standard & Poor’s 500 index each shot up nearly 11 percent.
There didn’t appear to be any one catalyst for the surge that saw the Dow nearly double its gain in the last hour of trading. Many analysts said investors were grabbing up stocks in the belief that Wall Street had fallen too far in recent sessions; the Dow had dropped 500 points in two days. Some said buying early in the day came from anticipation of an interest rate cut Wednesday by the Federal Reserve, and the market just followed its recent pattern of building on its gains or losses in the last minutes of the session.
“There is nothing fundamental that came out today or yesterday that would take it up or down. We’re all groping for something meaningful to talk about,” said Bob Andres, chief investment strategist at Portfolio Management Consultants. “The market is exhausted from going down.”
But given the relentless volatility in the market — out of 20 trading days this month, there have been only two that didn’t see the Dow close up or down in triple digits — no one expects that stocks are now headed higher for good. After Wall Street’s devastating losses that slashed 2,400 points off the Dow in eight sessions, market veterans warned that the recovery would be rocky, including huge gains followed by huge declines.
“I don’t think it will be a sustained move,” said Matt King, chief investment officer at Bell Investment Advisors, of Tuesday’s surge.
It was clear that investors wanted to buy — they looked past news of a sharp drop in consumer confidence early in the session. The Conference Board said its index of consumer confidence has fallen to 38 in October, well below the 51 analysts expected; with consumer spending accounting for more than two-thirds of economic growth, the reading was the latest in a long line of disappointing data.
The market’s reaction was notable because it was investors’ anguish over a likely recession that had them selling just days ago. But analysts don’t necessarily see that change of heart as a sign of health.
“I would like to hope that a little bit of fear is being replaced by greed at this point,” said Kim Caughey, equity research analyst at Fort Pitt Capital Group. “I’m not that happy, though. There’s no big news out there.”
The Dow rose 889.35, or 10.88 percent, to 9,065.12. That was its second-largest point gain, coming after the 936 points the Dow jumped on Oct. 13.
The Dow was up 456 points at 3 p.m., an hour before the close, and rose as much as 906.31 before edging back.
The gains in the 30 blue chip stocks were stunning — Alcoa Inc. was up 19.25 percent, while Verizon Communications Inc. rose 14.63 percent. Even oil stocks shot higher, withstanding another drop in the price of crude — Exxon Mobil Corp. and Chevron Corp. each rose more than 13 percent. Financials kept pace with the market’s gains. JPMorgan Chase & Co. jumped 10.6 percent.
But the advance still left the Dow down 36 percent from its Oct. 9, 2007, record close of 14,164.53. It has lost 20.6 percent since the Sept. 15 bankruptcy filing of Lehman Brothers Holdings Inc., the event led to the near-paralysis of the credit markets and a series of dramatic government steps aimed at stabilizing a faltering economy.
Broader stock indicators also surged Tuesday. The Standard & Poor’s 500 index rose 91.59, or 10.79 percent, to 940.51, and the Nasdaq composite index rose 143.57, or 9.53 percent, to 1,649.47.
The Russell 2000 index of smaller companies rose 34.15, or 7.62 percent, to 482.55.
Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume came to a moderate 1.72 billion shares compared with 1.34 billion shares traded Monday.
Bond prices were mixed as some investors looked for the safety of government debt. The yield on the three-month Treasury bill, regarded as the safest investment around and an indicator of investor sentiment, fell to 0.74 percent from 0.77 percent Monday. The lower yield indicates an increase in demand. Meanwhile, the yield on the benchmark 10-year Treasury note rose to 3.84 percent from 3.69 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude settled down 49 cents to settle at $62.73 a barrel on the New York Mercantile Exchange.
“I guess we’re just coming out of this oversold situation. I think you’ve got a lot of players on the sidelines,” said Dan Deming, a trader at Stutland Equities in Chicago. “There’s just no one standing in the way right now.”
He contends investors are also anticipating an interest rate cut. The Fed is expected to cut its target fed funds rate by half a point to 1 percent.
Investors were also buying overseas after huge declines Monday on economic worries. Japan’s Nikkei stock average jumped 6.41 percent and Hong Kong’s Hang Seng index surged 14.4 percent — its biggest gain in 11 years — a day after plunging more than 12 percent. Britain’s FTSE 100 rose 1.92 percent, Germany’s DAX index jumped 11.3 percent, and France’s CAC-40 rose 1.55 percent.
The rally comes as stocks have been beaten down in the past six weeks over a freeze in the credit markets. Investors have worried about the economy’s ability to avoid a severe downturn with loans more expensive and harder to obtain.
But Monday saw the start of the Fed’s efforts to revive lending in the commercial paper market, where companies turn for short-term loans. And the Treasury Department is injecting $125 billion into nine of the country’s largest banks this week and another $125 billion into other banks.
Some corporate news also gave a lift to stocks Tuesday. Boeing Co. rose $6.55, or 15.5 percent, to $48.91 after the company and its striking machinists’ union hammered out a tentative four-year labor deal that could end a 53-day walkout that has idled factories and delayed jet deliveries.