- Title: USA: Dow jumps over 9000 on bargain hunting and rate cut expectations
- Date: 29th October 2008
- Summary: (AM) NEW YORK, NEW YORK, UNITED STATES (OCTOBER 28, 2008) (REUTERS) (SOUNDBITE) (English) PATRICK NEWPORT, ECONOMIST WITH IHS GLOBAL INSIGHT, SAYING: "But I don't think anyone has a good handle on where financial markets are heading from this point forward."
- Embargoed: 13th November 2008 12:00
- Location: Usa
- Country: USA
- Topics: Finance
- Reuters ID: LVA762ZBS6F7SKTMGBQJLDFUVNAV
- Story Text: Dow and S&P have second-best day ever as markets rebound on rate cut expectations.
U.S. stocks rose more than 10 percent on Tuesday (October 28), the second-biggest point gain ever for the Dow and S&P, after investors scooped up beaten-down shares on optimism that the U.S. Federal Reserve and other central banks will cut interest rates further.
Hopes for a rate cut grew at midday after a newspaper reported the Bank of Japan is considering lowering rates, further fueling hopes for a Fed cut after its latest policy meeting on Wednesday. Lower borrowing costs could help bolster corporate profits as the economy heads toward a deep recession.
Japan's Nikkei newspaper report pulled the yen down more than 5 percent against the dollar, easing worries after a recent sharp rally in the Japanese currency that had slammed global markets. On Tuesday, the yen suffered its biggest daily drop against the U.S. dollar since 1974.
Shares of capital-intensive companies such as telecoms posted the day's sharpest gains, including Verizon Communications, up over 14 percent, and AT&T, up over 13 percent.
Big oil companies gave the Dow its biggest boost after British major BP Plc reported a record quarterly profit, beating expectations. Exxon Mobil and Chevron both rose more than 13 percent.
Shares of Boeing jumped more than 15 percent to USD 48.91 after the aircraft manufacturer came to a tentative agreement with its largest union to end a strike and stop revenue losses estimated at USD 100 million a day.
"I don't think anyone has a good handle on where financial markets are heading from this point forward," Economist Patrick Newport of said.
"From here I think we have to wait and see what happens to financial markets. The Fed and the Treasury have implemented a number of proposals to thaw the financial markets," Newport told Reuters.
"They're beginning to thaw, but I think we have to wait a few more weeks to see what is the situation with the financial markets -- is credit flowing; are people able to borrow money to buy homes? If they're not, then we're in deep trouble."
The Dow Jones industrial average jumped 889.35 points, or 10.88 percent, to 9,065.12. The Standard & Poor's 500 Index surged 91.59 points, or 10.79 percent, to 940.51. The Nasdaq Composite Index ran up 143.57 points, or 9.53 percent, to 1,649.47.
It was the second-biggest point gain ever for the Dow and the S&P.
The yen's recent rally has forced an unwinding of the so-called "carry trade" -- a phenomenon of Japan's low interest rates, in which investors borrowed yen to finance investments in high er-yielding assets, such as U.S. stocks.
Wal-Mart's stock rose after the world's largest retailer stuck to its 2009 sales growth forecast, saying it will weather the economic turmoil now and could come out even stronger than its rivals when the economy rebounds.
Wal-Mart shot up 11.1 percent to USD 55.17 on the New York Stock Exchange.
The rally came despite an economic picture that remained gloomy after data showed U.S. consumer confidence tumbled to a record low in October as the financial crisis made Americans anxious about their jobs and pessimistic about the future.
Verizon ended at USD 31.65, up 14.6 percent, and AT&T finished at USD 27.61, up 13.2 percent, in NYSE trading.
In the oil sector, Exxon climbed 13.3 percent to USD 74.86, while Chevron soared 13.5 percent to USD 70.02. The big energy producers' shares gained even as front-month U.S. oil futures slipped 49 cents to settle at USD 73 a barrel.
Whirlpool Corp tumbled 8.3 percent to USD 45.87 after the world's biggest appliance maker said it would cut 7 percent of its workforce and slashed its 2008 earnings outlook amid weakening demand.
Trading was moderate on the New York Stock Exchange, with about 1.73 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion. Most of the volume came in the last hour of trading.
On Nasdaq, about 2.77 billion shares traded, above last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 4 to 1 while on the Nasdaq, slightly more than two stocks rose for every one that fell.
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