Dow Closes Up Nearly 900 Points

By  | 

WALL STREET - It's been another astounding day on Wall Street, with the Dow Jones industrials soaring nearly 900 points as investors scooped up stocks that were pounded lower in recent sessions.

"We've had some pretty bad news and the consumer confidence was pretty grim this morning," said Doreen Mogavero of Mogavero, Lee & Co. "So I'm amazed it was able to be shaken off as well as it was."

The markets also shrugged off more bad housing numbers which revealed the average price of a home has fallen nearly 18 percent over the past year, reports CBS News business correspondent Anthony Mason.

Most of the move came in the final hour of trading, and the sudden surge lifted blue chip stocks like Walmart, which was up 11 percent, Boeing, up 15 percent and General Motors, up 14 percent.

When the closing bell rang, the Dow had its second biggest point gain ever.

"But we still have to see if it sticks," Mogavero said. "You know we've had so much volatility in these markets the last few weeks. I mean we saw a 900-point move up the other day and we lost that all again. So let's see what happens. I'm not going to put too much stock in today."

That's a widespread sentiment on the street, Mason reports. In other words, beware: it may only be a bear market bounce. The rally added a trillion dollars in value to the Wilshire 5000 index. But it's still down 37 percent for the year. The climb back's going to be a long one.

Analysts said some investors were buying in anticipation that the Federal Reserve will cut its fed funds rate by half a point to 1 percent on Wednesday. Others said the market had just fallen too far, with the Dow having dropped more than 500 points, the previous two trading days.

Still, the day was remarkable because investors brushed off a big drop in consumer confidence reported by the Conference Board.

The Dow is up about 889 points at the 9,065 level. That was its second-largest point gain, coming after the 936 points the Dow jumped on Oct. 13.

The market did pull off its highs after the Conference Board said its index of consumer confidence has fallen to 38 in October, well below the 51 analysts expected. Wall Street is worried that consumers, whose spending drives more than two-thirds of economic growth, will keep pulling back, particularly as the holiday shopping season approaches - but with a litany of bad economic news this month, many investors expected the index to sag.

"The market already reflects a very, very poor outlook. That said, these numbers are coming in way lower than expected," said Jack Ablin, chief investment officer at Harris Private Bank.

A higher open came as home prices tumbled by the sharpest annual rate ever in August, with little indication of a turnaround in sight, a closely watched index showed.

The Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 percent from August last year, the largest drop since its inception in 2000. The 10-city index plunged 17.7 percent, its biggest decline in its 21-year history.

By holding onto gains, the market seemed to have come to terms with the fact that bad economic news will continue to stream in.