Dow Rockets Up 420 Points, Its Biggest One-Day Gain in 5 Years

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Associated Press
Wednesday, March 19, 2008; Page D05

NEW YORK, March 18 -- Wall Street stormed higher Tuesday as Lehman Brothers and Goldman Sachs reported stronger-than-expected earnings and the Federal Reserve decided to cut interest rates by three-quarters of a percentage point.

The Dow Jones industrial average had its biggest one-day point gain in more than five years, rising 420.41, or 3.51 percent, to close at 12,392.66. The blue chips initially gave back half of their 300-point gain after the Fed's announcement but then shot higher.

The Standard & Poor's 500-stock index rose 54.14, or 4.24 percent, to 1330.74, and the Nasdaq composite index rose 91.25, or 4.19 percent, to 2268.26.

Quarterly results from Lehman Brothers and Goldman Sachs comforted investors fearful that investment banks would weaken further. Both banks posted quarterly profits early Tuesday that were significantly lower than they were a year ago but higher than analysts predicted.

"The overwhelming news this morning was the Lehman and Goldman Sachs earnings," said James Herrick, director of equity trading at Baird. "The earnings this morning allayed investors' fears that there's going to be a hard collapse."

Data released Tuesday supported the notion that the economy is sliding as costs are rising. The Commerce Department said home construction fell in February. Housing starts dropped 0.6 percent, and building permits plummeted 7.8 percent.

Meanwhile, the Labor Department reported a 0.3 percent rise in the producer price index for February, in line with estimates, but the core PPI, which strips out food and energy prices, rose by a greater-than-expected 0.5 percent.

Following the Fed's move, the dollar regained ground against some major currencies. Gold prices fell, and crude oil surged $3.74, to settle at $109.42 a barrel, on the New York Mercantile Exchange.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.5 percent.

Movers

Lehman Brothers rose $14.74, to $46.49.

Goldman Sachs rose $24.57, to $175.59.

Bear Stearns gained $1.10, to $5.91.

Office Depot rose 55 cents, to $11.41.