Dow Recovers From Plunge; Europe Sinks
U.S. stocks rebounded dramatically on Wednesday afternoon after a morning plunge, leaving the major stock indexes either up slightly or down slightly.
But the market overall still was broadly lower in heavy trading, amid mounting anxiety over new declines in many emerging markets. Bond yields ended mostly unchanged.
Meanwhile, European stocks finally reflected emerging-market woes, as major markets on the Continent fell sharply from Tuesday’s record highs.
On Wall Street, the Dow industrials finished off just 27.16 points at 8,963.73 after falling as much as 175 points early in the day.
The Nasdaq composite, down as much as 2% early on, ended with a gain of 3.01 points at 1,781.10.
U.S. stocks’ slide was triggered by another round of deep declines overnight in Asia, led by Hong Kong stocks, which plunged 5.3% on growing fears that the Hong Kong economy is headed into recession. (Story, D1)
Russia’s financial crisis also weighed on the U.S. market by raising the potential for new civil strife in that troubled country. (Story, A1)
The Dow, after falling 150 points Tuesday, sank from the outset Wednesday, dragging the broad market lower.
But the market turned decidedly in midafternoon. The rebound came in two steps, said Andrew M. Brooks, head of trading at T. Rowe Price Associates. First, people who were waiting for stocks to fall to specific prices started buying. Once those purchases nudged stocks higher, many others who had fled the market earlier returned.
“Sellers see the buying and they jump back in,” Brooks said. “The velocity is just amazing. It’s like throwing gasoline on a fire.”
“I saw a lot of institutions that saw these declines in certain stocks and were coming in to buy them,” said James Volk, co-director of institutional trading at D.A. Davidson & Co., adding that more volatility may come. “I don’t think the last shoe has dropped.”
Computerized program trading also helped, as some institutions began buying stock index futures, which then spurred buying of individual stocks.
Nonetheless, demand was centered in big-name stocks such as Microsoft, up $2.38 to $86; Disney, up $2.56 to $114.31; and Merck, up $2.31 to $118.81. Overall, losers still swamped winners by 2,196 to 875 on the New York Stock Exchange, on heavy volume of 703 million shares.
Stocks down the most included many financial issues and industrial/commodity names.
While blue chips still are hovering near their all-time highs, smaller stocks are already well into a “correction,” analysts note. The Russell 2,000 index of smaller stocks fell 1.1% to 450.26 on Wednesday. At its low for the day, the Russell was almost 10% below its April 21 record high.
In foreign trading, most Asian markets fell with Hong Kong. The Tokyo market sank 1.4%. Taiwan’s market dropped 5.2% and Singapore fell 1.3%. South Korean stocks, however, inched up 0.5%.
Those renewed losses fueled heavy selling in Europe. The Frankfurt market fell 2.7%, London dropped 1.7% and Paris fell 2.4%.
Beaten-down Latin American markets, however, rebounded with U.S. stocks. The Mexico City market gained 0.6%, while the main Brazilian market surged 3.3%.
The U.S. bond market, after rallying on Tuesday, stalled out Wednesday. The yield on the 30-year Treasury bond inched up to 5.84% from Tuesday’s 5.83%, which was the lowest since April 7.
Market Roundup, D8
