Dow Skyrockets in Final Hour of Trading

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Dow Skyrockets in Final Hour of Trading

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Stocks raged sharply higher in afternoon trading today, buoyed by bargain hunters acting on signs of improving credit conditions and expectations that the Federal Reserve will cut a key interest rate tomorrow to bolster the economy.

The Dow Jones industrial average closed up nearly 11 percent at 9,065 with a gain of 889 points. It was the Dow's second-biggest point gain in its history, after a 936 point rise on Oct. 13.

The Standard & Poor's 500 stock index rose 10.8 percent, 92 points, to 940.5. The tech-heavy Nasdaq jumped 144, or 9.5 percent, to 1649.

Much like yesterday, when the markets lost money, the exchanges experienced extreme volatility late in the day. The Dow gained more than 750 points after 2 p.m. Yesterday, a wild swing sank the Dow by more than 200 points as hedge funds and mutual funds sold positions to cover margin calls, investors and analysts said.

In today's trading, the markets opened sharply up but retreated later in the morning after bleak morning reports about consumer confidence and housing prices. But investors brushed aside those concerns in the afternoon and launched into a buying spree as the Federal Reserve reported positive results from its program to buy up commercial paper to cover corporate IOUs that are used for everything from payrolls to equipment purchases.

Sales of longer-term commercial paper soared 10-fold after the Federal Reserve began buying the corporate loans, according to Fed data. Companies yesterday sold 1,511 issues totaling a record $67.1 billion of the debt due in more than 80 days, compared with a daily average of 340 issues valued at $6.7 billion last week, according to a report by Bloomberg.

"At long last there were tangible signs that the credit market was easing and government programs were beginning to work," said Jack Ablin, chief investment officer of Harris Private Bank. "This the basis of confidence and the underpinning of the economy."

The day started on a strong note with global markets rallying overnight because of the Japanese yen's decline against the dollar, a positive sign that Tokyo may be able to export its electronics and other goods to bolster its economy.

Japan's Nikkei stock index recovered from its 26-year low reached Monday, rising 6.4 percent to 7,622 points. The Hong Kong Hang Seng index rose 14.4 percent to 12,596, with investors lifting shares of financial heavyweight HSBC Holdings 20 percent.

In Europe, the pan-European Dow Jones Stoxx 600 Index rose 2.3 percent to 199. The U.K. FTSE 100 was up 1.9 percent to 3,926. News that Porsche planned to take over nearly three-fourths of the stock of fellow German automaker Volkswagen lifted the German DAX index 11.3 percent to 4,823.

The activity overnight spurred an early morning rally in the United States with the Dow jumping as high as 300 points at one point on before falling back on a report by the Conference Board, a private research group, that its index of consumer confidence plummeted to an all-time low of 38 in October, compared to 61.4 in September. The report showed that consumers may be clamping shut their pocket books ahead of the holiday season, which could drive prolonged recessionary pressures, analysts said.

That report was compounded by bleak housing data: The S&P/Case-Shiller home-prices index fell 16.6 percent in 20 major metropolitan areas in August, compared to the same period last year.