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What a ride!
Wall Street traders — and the rest of the world’s finance industry — were on the edge of their seats yesterday as the stock market wildly fluctuated right up until the closing bell.
But the nail-biter ended on a good note when the market put up a dramatic, late-day rally spurred by news that the Federal Reserve promised to keep interest rates near zero for at least two more years.
The Fed also said it would consider further action that could calm the markets.
The Dow Jones industrial average closed at 11,239, up 429 points — the biggest single-day point gain since March 2009.
Getting there wasn’t easy, though — investors were still reeling after stocks tanked Monday in response to Standard & Poor’s bean counters downgrading America’s debt rating.
At one tense point, the market dipped a terrifying 205 points below Monday’s low. It started shooting upward at around 2:45 p.m., right about the time of the Fed’s much-anticipated statement, which also presented a bleak outlook on the global economy.
An interest rate near zero should keep borrowing costs low and encourage investors to take chances with new start-up businesses, analysts said.
It could also convince people to plunk cash into potentially risky assets — like stocks — in the upcoming months, experts explained.
Stocks also rebounded in Japan, where the Nikkei-225 index was up 1.12 percent today just before trading closed, its first gain in four days. In Hong Kong stocks climbed more than 3 percent today.
Some economists, though, said the markets aren’t yet in the clear.
“It’s normal to have a bounce-back after the downward moves we’ve had,” said John Carey, a portfolio manager at Pioneer Investments.
“The key is whether this is a sustained recovery or just a sign of bargain hunters coming in and picking up beaten-down stocks.” The Fed’s decision sparked a very rare uprising of its regional managers — three of the 10 objected to the decision, the first time that’s happened since 1992.
Those naysayers argued that low interest rates could fuel inflation, which caused some alarm on the Wall Street trading floor.
“There’s always dissent but their public vote was usually unanimous,” said senior economist Steve Blitz of ITG Investment Research.
“This time, the divide has hardened with a kind of Tea Party mentality of saying ‘No’ and that monetary policy has been too easy for far too long,” he added.
Many in Washington are demanding that President Obama summon Congress back from vacation to deal with debt and unemployment.
Republican presidential contender Rep. Michele Bachmann (R-Minn.) said Obama should call a special session, as have freshman Tea Party members of Congress and a slew of congressional aides.
The administration all but ruled out a special session, saying it doesn’t have the support of the House leadership.
The Fed also yesterday sharply downgraded its own view of the US economy.
“Economic growth so far this year has been considerably slower than . . . expected,” the Fed said in a statement. “[The Fed] now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting.”
The market’s solid performance echoed similar gains in Europe yesterday where the London market closed up 1.89 percent and Paris up 1.63 percent.
Germany finished near even with a 0.10 percent decline.
Even with the rally, traders continue to pump money into US Treasuries, pushing the yield on the 10-year Treasury note to a record low of 2.03 percent before inching higher.
And gold continued to rise, closing at $1,774 an ounce.
Additional reporting by Paul Tharp and Post Wire Services