Investors See Glimmer of Hope, Send Shares Higher
A few clues that the U.S. economy’s downward spiral might be slowing galvanized Wall Street on Thursday and sent the stock market soaring for the second time this week.
Investors searching for relief from a relentless march of bad economic news found wisps of hope in developments that, not many months ago, would have been regarded as alarming. The news, by and large, was bad — just not quite as bad as feared.
General Electric, the blue-chip corporation, was stripped of its triple-A credit rating, an emblem of business prowess it proudly held since 1956. But its rating fell just one notch, less than some analysts predicted. Shares of GE soared 13 percent.
The Commerce Department reported that retail sales fell slightly in February — again, less than forecast. And the head of the beleaguered Bank of America said the lender probably would not need more government money but other banks might.
Less-bad was good enough. The Dow Jones industrial average jumped 239.66 points, or 3.46 percent, to 7,170.06, while the Standard & Poor’s 500-stock index leaped 29.38 points, or 4.07 percent, to 750.74.
Since Monday, when the market fell to its lowest point in 12 years, stock indexes have soared roughly 10 percent, their best run since November. But few experts were willing to call an end to the bear market, which has cut the Dow in half since its peak October 2007.
Indeed, many analysts predicted that this rally, like others before it, will fizzle before the market stages a lasting recovery. Economists cautioned that the economy was not about to turn a corner anytime soon, even though the numbers suggested that consumers were not entirely in a bunker mentality.
But some saw signs of a subtle shift in investor psychology, a willingness to believe, even for a few days, that Wall Street’s worst fears might be overblown.
“When the markets have been battered as much as they have, any little shred of positive news is greeted with great cheer,” said Marc D. Stern, chief investment officer at Bessemer Trust, an investment firm in New York.
The stock market, Stern said, seems to be entering a new phase, in which investors reconsider their despairing views about the economy and corporate profits. He said the market could fall again, though he does not expect as many “sharp free falls.” Usually the stock market starts trending higher before the economy recovers.
News that the ratings agency Standard & Poor’s cut GE’s credit rating one notch calmed fears that the giant company would be toppled by the potential losses in its finance arm. GE, the report concluded, is not a deeply troubled bank in disguise. “We believe,” it said, “that GE’s cash generation capabilities remain fundamentally strong — even in the face of enormous global economic headwinds.”
Bank of America rose 19 percent. Other financial shares also rose. The S&P 500 Financial Index rallied 10 percent, bringing its gain for the week to 33 percent.
Stocks opened lower, reflecting early weakness in overseas markets, but by 10 a.m. the market was in positive territory.