Stocks Stage Strong Rebound
Stocks roared back on Wednesday, with the Dow average gaining an eye-popping 6%, as investors concluded that there were bargains to be found after weeks of selling had pushed stocks to levels not seen in nearly five years.
The Dow rocketed up 488.95 points, or 6.35%, to 8,191.29, led by a rebound in financial components. It was the second-largest point gain ever.
The tech-heavy Nasdaq composite index, meanwhile, surged 60.96 points, or 4.96%, to 1,290.01. The broader Standard & Poor's 500-stock index was up 45.69 points, or 5.73%, to 843.39.
The rally was fueled in part by JP Morgan Chase (JPM ) Chief Executive William Harrison, Jr. who said on Wednesday that his bank acted properly in all Enron matters and that his bank has ample liquidity.
Both JP Morgan and Citigroup (C ) are being probed by congressional investigators who contend that the banks may have helped energy trader Enron with some of its questionable accounting schemes. The news had intensified the selling frenzy in the previous two days.
Wall Street was anticipating more earnings reports from companies on Thursday. Among those scheduled to release are satellite and entertainment network company Viacom (VIA ), coffee retailer Starbucks (SBUX ) and oil exploration firm Apache (APA ).
Thursday will also bring a several economic data reports including a reading on June durable good orders, which are seen rising 1%. Existing home sales are seen falling to an annualized rate of 970,000 from 1.028 million.
Among other upbeat developments stoking the rally on Wednesday, Banc of America raised its rating on oil giant Exxon Mobil (XOM ) to "strong buy" from "buy," saying the stock would be fairly valued at $38, which is higher than its current price.
Meanwhile, pharmaceutical Merck (MRK ) announced plans to buy back as much as an $10 billion more of its stock and to increase its quarterly dividend by $0.01 a share.
And Internet retailer Amazon.com (AMZN ) posted a narrower quarterly loss and upped its sales outlook based on solid activity overseas and growth at its unit selling second hand items.
The market may have also taken heart from news that Congress had approved legislation that improves oversight of accounting firms beefs up criminal penalties for corporate wrongdoers, among other reforms. The reform proposal must still be signed by the President.
Stocks had started out lower Wednesday amid unconfirmed rumors that the Federal Reserve may hold an emergency meeting to consider a rate cut, says S&P MarketScope. But the Fed responded that it had no comment.
It was hard, however, to totally forget about the troubles plaguing Wall Street. Making headlines was news that the founder of cable television firm Adelphia Communications, John Rigas, and two of his sons were arrested and charged along with other executives with securities-fraud.
And media and housewares company Martha Stewart Living Omnimedia (MSO ) warned that a probe of CEO Martha Stewart regarding sales of the stock of biotech company ImClone will cause it to miss its 2002 earnings per share guidance of $0.53. The company posted higher second-quarter earnings thanks to growth in its publishing unit and advertising pages growth.
Oil services company Halliburton (HAL ), which has seen its accounting methods come under suspicion, reported a quarterly loss of $498 million after booking a $391 million one-time charge to cover future asbestos claims.
After the market close, media behemoth AOL Time Warner (AOL ) posted a quarterly net profit -- its first since the merger between the old-line Time Warner media business and the new economy America Online Internet service provider. The company credited strength in its cable and film businesses.
Treasuries started strongly, benefiting from a safe haven bid, but bond prices weakened through the session as money moved back into stocks.
European markets closed mixed. In London, the Financial Times-Stock Exchange 100 index was down 80.90 points, or 2.10%, to 3,777.10 as the global selloff, sparked by U.S. accounting scandals, accelerated.
France's CAC 40 shed 46.47 points, or 1.51%, to 3,023.69.
But Germany's DAX, which tanked in recent sessions, bounced up 116.83 points, or 3.32%, to 3,632.66. Three German states said their inflation rates rose in July. In corporate news, German electronics company Siemens (SI ) warned that fiscal fourth quarter earnings will be weaker than expected.
Asian markets ended lower. In Japan, the Nikkei 225 index lost 267.091 points, or 2.62%, to 9,947.72 as sell-orders in high volume from domestic pension funds, spurred by continued declines in U.S. equities, damaged the supply/demand balance in current low market turnover. In Hong Kong, the benchmark Hang Seng index skidded 341.90 points, or 3.31%, to close at 9,971.99.
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