Volatile Wall Street Makes Late-Day Surge
Wall Street spent another session buffeted by volatility Thursday, closing mixed after investors wrestled with their fears about the economy but also looked for bargains after two days of selling. While the Dow Jones industrials and Standard & Poor's 500 index rose sharply, a downdraft in tech stocks left the Nasdaq composite index with a loss.
Buying came in spurts and then often quickly evaporated as investors fretted that the economy is either in a recession or headed for one. A two-day selloff that sliced nearly 750 points from the Dow drew some investors back into the market, but they gravitated largely toward big-name stocks seen as safer bets.
"I think that people feel that it's got to stop sliding someplace and they're looking basically for bargains," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "The analogy I'm using right now is that you can buy a BMW at Toyota prices. But there is still concern that better bargains can be had."
With its gyrations, Wall Street is living up to predictions that trading will remain volatile as investors try to test whether the market has formed a bottom.
Manny Weintraub, president of Integre Advisors in New York, said that several of the market's attempts to rally have been short-circuited by sellers who had awaiting an opportunity to cash out and that some investors looking to snap up inexpensive stocks are worried about getting burned by further declines.
"A lot of bargain hunters came in last week and now that money has been spent and they can't hunt twice," he said.
Wall Street's jitters came as investors tried to extract clues about where the economy is headed from a mix of corporate news.
Goldman Sachs Group Inc. is preparing to cut about 10 percent of its work force, according to a person briefed on the plan who requested anonymity because the company hadn't publicly disclosed details of the plan. Meanwhile, Amazon.com Inc. lowered its revenue guidance for the year amid a weakening economy. Drugmaker Eli Lilly and Co. said it recorded a loss for the third quarter after booking a write-down of almost $1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa. Dow Chemical Co. said its quarterly profit rose 6 percent, helped by price hikes that offset a nearly 50 percent increase in raw materials and energy costs.
A snapshot of the labor market signaled highlighted one of investors' worries about the fragility of the economy. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said. Analysts caution, however, that the weekly readings can be volatile.
CBS News correspondent Anthony Mason reports that the unemployment rate, now just above 6 percent, could be headed to 7.5 percent, according to a forecast by J.P. Morgan Chase.
"We're looking at a recession which we believe will give us the weakest consumer spending numbers in the post-World War II era," said Bruce Kasman, chief economist at J.P. Morgan Chase.
Investors viewed the data as more evidence that the financial crisis is battering the economy and forcing companies to cut back. The reports are helping exacerbate big swings in the market.
Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York, cautioned that Wall Street will need to rein in its sharp swings before some investors will feel confident enough to return.
"I don't think anyone can buy and sell stocks right now with conviction," he said.
According to preliminary calculations, the Dow rose 172.04, or 2.02 percent, to 8,691.25, after rising 277 points and falling by 276 points during the session. On Wednesday, the Dow lost 514 points as investors worried that the global economy is poised to weaken. That was on top of a 231-point loss Tuesday.
Broader stock indicators were mixed Thursday. The Standard & Poor's 500 index rose 11.33, or 1.26 percent, to 908.11, and the Nasdaq composite index fell 11.84, or 0.73 percent, to 1,603.91.
The Russell 2000 index of smaller companies fell 12.05, or 2.40 percent, to 489.92.
While the major indexes were mixed, declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 1.7 billion shares.