Rally Breaks Five-Day Losing Streak
Thursday, March 5, 2009
U.S. stock markets surged back up yesterday, paring some of their steep losses from earlier in the week and snapping a five-day losing streak despite weak economic reports.
The Dow Jones industrial average gained 2.2 percent, or 149.82 points, to close at 6875.84. The rally came two days after the blue chip average closed below 7000 for the first time in 12 years. The broader Standard & Poor's 500-stock index climbed 2.4 percent, or 16.54 points, to close at 712.87, one day after falling below 700 for the first time since 1996. The tech-heavy Nasdaq composite index was up 2.5 percent, or 32.73 points, to close at 1353.74.
Wall Street analysts and traders said they would not read too much into the rally, which was fueled by gains in shares of energy companies and those that produce basic materials, following reports that the Chinese government might provide further stimulus to its economy. Similar rallies have followed other bear-market lows in October and November, only for those gains to later erode.
"The one thing that has been pretty problematic is anyone who has bought into any rally has not been rewarded," said Todd Clark, director of trading at Nollenberger Capital Partners. "Buying into advances hasn't worked, and so you are going to have some people looking at this with a healthy amount of skepticism, and prudence would suggest that you don't chase the market at this point."
The upturn yesterday came despite a dismal outlook on the U.S. economy as published in the Federal Reserve's "beige book," an anecdotal survey of economic activity culled from the Fed's 12 districts. Reports from those districts showed a broad-based decline throughout the national economy in January and through late February, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. A separate report, the ADP National Employment Report, said private companies had cut 697,000 U.S. jobs in February, a steeper drop than economists had predicted.
Benchmark crude oil for April delivery rose $3.73 a barrel, to $45.38, on the New York Mercantile Exchange.
Shares of struggling General Electric closed down 32 cents, or 4.6 percent, to $6.69 after trading below $6 for part of the day. Shares of J.P. Morgan Chase closed down $1.71, or 8.1 percent, at $19.30.
Overseas markets rallied, led by the Shanghai composite index, which closed up 6.1 percent. European stocks were also up, with London's FTSE gaining 3.8 percent and Germany's DAX up 5.4 percent.