Market Nearly Recovers From Record Losses, Buoyed by High Energy Prices
The stock market recovered almost all of its losses from Tuesday’s sharp sell-off as investors went bargain-hunting on Wednesday at Wall Street’s equivalent of a late summer sale.
The morning after the market’s worst day in three weeks, the Dow Jones industrial average started the trading session up immediately almost 100 points. The rally fed on itself as trading continued, and stock prices ended the day posting some of their largest gains so far this year.
The Dow rose 247.44 points, or 1.9 percent. Broader indexes fared even better. The Standard & Poor 500-stock index gained 2.2 percent, and the Nasdaq composite increased 2.5 percent.
Trading was a near mirror image of Tuesday. All 30 stocks in the Dow average and all but 18 of the 500 stocks in the S&P index climbed. On Tuesday, 29 Dow stocks and 487 S&P 500 stocks declined.
Market strategists said the cascading nature of the rally suggested that computer trading algorithms programmed to buy low were heavily at work. But individual investors looking for bargains were also a factor, as were rising gas prices and word from the Federal Reserve chairman, Ben S. Bernanke, that the central bank was “prepared to act as needed” to prevent the recent market distress from spreading further.
Trading volume was low — typical for a day in late August — suggesting that the market’s big swings this week have been somewhat exaggerated. On the New York Stock Exchange, 1.3 billion shares changed hands, compared with a daily average of about 1.8 billion.
“For as big as the movements we’ve seen the last two days, the volume has been pretty low,” said Ernie Ankrim, chief investment strategist at Russell Investments, an investing and financial research firm in Tacoma, Wash. “So I’m not sure I take too much stock in this. When you have small volumes you can have large movements dictated by relatively few market participants.”
The Dow closed Wednesday at 13,289.29. The S&P 500 ended up 31.40 points at 1,463.76, and the Nasdaq rose 62.52, to 2.563.16.
The benchmark 10-year Treasury note fell 14/32, to 101 16/32. The yield, which moves in the opposite direction of the price, rose to 4.56 percent, from 4.51 percent.
Energy company stocks led the charge Wednesday as oil prices jumped to a three-week high on the New York Mercantile Exchange. The price of a barrel of crude oil for delivery in October rose 2.5 percent, to $73.51, after the Energy Department reported that the nation’s gasoline and oil reserves fell more last week than Wall Street forecasters had predicted. After leading the market’s decline on Tuesday, shares of financial companies like Lehman Brothers and Citigroup rebounded Wednesday as Wall Street saw a greater possibility that the Fed would lower its benchmark short-term lending rate by half a percentage point, to 4.75 percent, when it meets on Sept. 18. Futures contracts for the Fed’s key rate on Wednesday showed that nearly half of traders now expect a half-point rate reduction.