U.S. stocks rallied today in a hectic session marked by a tug of war between bargain hunting and hedge fund redemptions.
The Dow Jones industrial average closed up 172.04, or 2.02%, at 8,691.25; the S&P 500 rose 11.33, or 1.26%, closing at 908.11; but the Nasdaq composite was down 11.84, or 0.73%, to close at 1,603.91. All numbers are preliminary.
Equities rallied from the start as some investors are starting to see buying opportunities with the major indexes at their lowest since April 2003. The rally was cut short by steady selling that traders said was related to hedge fund redemptions, which analysts estimate around $100 billion this quarter.
Early trading was also down on a Labor Department report 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.
But stocks bounced back late in the day amid sentiment that a number of companies with good fundamentals have been unfairly punished in the month-old panic sell-off related to the $700 billion rescue package to shore up the financial system.
Financial stocks continued to weigh on the market as Goldman Sachs Group lost more than 5% on news the Wall Street powerhouse will lay off about 10% of its staff. Derivatives trading giant CME Group fell nearly 9% to its lowest since Aug. 30, 2005, on concerns that it might expose its customers to heightened risk if it were to clear credit derivatives swaps. Money managers Franklin Resources and Janus Capital Group posted double-digit declines after reporting poor earnings.
Although economic data remain weak, John Lonski, managing director at Moody’s Investors Service, said in a note to clients, “All is not doom and gloom for consumer spending,” referring to the recent sharp drop in crude oil prices, which officials of the Organization of Petroleum Exporting Countries will try to offset by cutting production at their emergency meeting Friday.
In Washington, Alan Greenspan, former Federal Reserve chairman, told the House of Representatives Committee on Oversight and Government Reform he was "shocked" at the breakdown in U.S. credit markets and said he was “partially” wrong to resist regulation of some securities.
"This crisis … has turned out to be much broader than anything I could have imagined,” Mr. Greenspan said in prepared remarks.
