Stocks Rebound, Biggest Gain Since '87
By Haitham Haddadin
Wednesday July 24, 5:08 pm Eastern Time
NEW YORK (Reuters) - Stocks surged on Wednesday, the broad market chalking up its biggest gain since October 1987 and the Dow adding a whopping 488.95 points, as investors stampeded back to buy stocks at prices cut down to multiyear lows after three weeks of relentless declines.
"At some point people get sick of fear and take a stab," said Brian Pears, head of equity trading at Victory Capital Management. But, like others, he was wary of the rally. Market watchers note that many powerful advances have been short-lived rallies in the bear market that began in 2000.
The market had another volatile session in extremely heavy trading. A record high 2.7 billion shares changed hands on the Big Board and more than 2.4 billion on Nasdaq. Volume has surged in recent days as investors struggle to discern their next move after days of declines.
It was the first time more than 2 billion shares were traded for four days in a row in NYSE history.
The blue-chip Dow Jones Industrial average (CBOT:^DJI - News) surged 488.95 points, or 6.35 percent, to 8,191.29, according to the latest data, after dropping more than 2 percent in early trading. It was the second largest points gain in the Dow's history.
The tech-loaded Nasdaq Composite Index (NasdaqSC:^IXIC - News) added 61.18 points, or 4.98 percent, to 1,290.23 after tumbling 3 percent in the morning. The Standard & Poor's 500 (CBOE:^SPX - News) climbed 45.73 points, or 5.73 percent, to 843.43.
For the Dow and the S&P 500, the rally represented the largest one-day percentage gains since Oct. 21, 1987 when the Dow rose 10.1 percent and the S&P surged 9.1 percent in the wake of the stock market crash earlier that month.
"We're way due for a bounce, but fundamentals haven't changed," said Matthew Johnson, managing director of trading at Lehman Brothers. "We're still dealing with terrorism, accounting issues and fundamentals, which appear to be showing signs of further deterioration."
J.P. Morgan (NYSE:JPM - News) surged 16 percent after the financial giant's chairman said it acted properly and with integrity after congressional investigators said it and Citigroup (NYSE:C - News) helped hide massive debt at bankrupt energy trader Enron Corp. (Other OTC:ENRNQ.PK - News). Standard & Poor's gave another boost to the stock by calling worries over the Dow member's liquidity positions "unfounded."
Aiding a sense of corporate house-cleaning was news of the arrest of three members of the founding family of Adelphia Communications Corp. (Other OTC:ADELQ.PK - News), which filed for bankruptcy last month.
Government officials led the related executives away, claimed they "looted" the company they created over 50 years ago. Two other former executives also were arrested on federal securities and bank fraud charges.
Other bits and pieces of news propelled the market. President Bush will consider new measures to boost the U.S. economy should it take a turn for the worse, his budget director said.
U.S. lawmakers also boosted sentiment by reaching final agreement on a massive corporate reform measure, preserving much of a Senate bill requiring stricter oversight of auditors but adopting stiffer criminal penalties passed by the House.
Bargain hunters swooped into the market after stocks sank to new five-year lows in the wake of days of wrenching selling. But market watchers were skeptical of the market's sudden spike, recalling investors' habit of selling into rallies to lock in profit in the bear market.
"We've just had this relentless selling. I think this is a relief rally," said Tim Heekin, director of trading at Thomas Weisel Partners. "It was triggered by a combination of asset allocation and technicals and in the past these rallies have only lasted a day and a half or two, so time will tell.
"Frankly, I think there's too much negative news out there that's going to prevent this market from going up a lot."
The Dow drew fuel from Exxon Mobil Corp. (NYSE:XOM - News), up $3.01 at $33.93, after Banc of America Securities raised its rating on the oil giant, saying its stock price looks attractive. Drugmaker Merck & Co. (NYSE:MRK - News) also lifted the Dow, jumping $3.55 to $42.60, or 9 percent, after approving a new $10 billion stock repurchase program.
"We have been so oversold in this ugly market we are certainly overdue for this kind of bounce but we had three or four of these big rallies this year with no follow-through so the real test is what happens in the days and weeks ahead," said Michael Kayes chief investment officer of Eastover Capital Management.
"Companies are in there buying their stocks and that has helped, and others are saying they will sign their financial statements or expense options, so there's bits and pieces of news that are helping."
J.P. Morgan rose $3.22 at $23.30, boosting the Dow, after hitting its lowest level since 1996 early in the day. The Dow member spiked as high as $23.65 as it fought back after news of a congressional probe into business practices at the company and Citigroup. Standard & Poor's then reiterated its credit ratings on J.P. Morgan and Citigroup, saying worries about a cash shortage were "unfounded." Citigroup, another Dow issue, rose $2.59 to $29.59.
Halliburton Co. (NYSE:HAL - News) soared 23 percent, or $2.10, to $11.20. The world's No. 2 provider of oilfield services posted a loss of almost half a billion dollars, after a charge, but the shares jumped as investors welcomed its attempt to quantify future asbestos liabilities. |
