Wall Street capped off one of the most frightening months in history on a high note Friday as the Dow jumped more than 100 points, giving the index its first two-day win streak in five weeks.
Today’s Market
The Dow Jones Industrial Average jumped 144.32 points, or 1.57%, to 9325.01, the broader S&P 500 rose 14.66 points, or 1.54%, to 968.75 and the Nasdaq Composite gained 22.43 points, or 1.32%, to 1720.95. The consumer-friendly FOX 50 added 6.95 points, 0.95%, to 738.14.
While October was as ugly as a month as you can imagine -- the worst since August 1998 -- the past week was as good as it gets: the blue-chip index surged 11.3%, or roughly 1,000 points, in its best weekly performance in 34 years. Most of that massive rally stemmed from Tuesday’s 889-point surge on the Dow, the index’s second strongest point gain in history.
Friday’s gains came despite any groundbreaking developments and in the face of a litany of new, ugly economic reports. The markets shrugged off the data, instead focusing on a solid rally from banking stocks.
"Today it’s been monster buying in the financials. They are clearly the driving force in this market,” said Michael James, senior equity trader at Wedbush Morgan Securities.
American Express (AXP) and JPMorgan Chase (JPM) led the way up on the Dow Friday, offsetting losses from GeneralMotors (GM) and Coca-Cola (KO).
Tech stocks weighed on the Nasdaq Composite on Friday on earnings worries about video game publisherElectronic Arts (ERTS) and SunMicrosystems (JAVA). On the other hand, Wynn Resorts (WYNN) and Monster (MNST) led the percentage winners on the Nasdaq 100. Despite the gains, the Nasdaq Composite ended October with its steepest monthly losses since February 2001.
It shouldn't come as a surprise that October was one of the worst months on record as it featured the height of the credit crisis, including nearly frozen credit markets, the passage of the controversial $700 billion rescue plan and the realization that the global economy could be in a recession.
The results weren't pretty as the Dow suffered dizzying losses throughout the month, including its worst weekly percentage loss ever and its steepest one-day loss since 1987.
Wall Street also saw unprecedented levels of volatility in October, highlighted by eight of the top ten largest point swings since data began to be compiled in 1995. The average point swing was 593 points -- twice as much as the annual average.
That's not to say Wall Street didn't see impressive gains this month as the Dow posted three of its top ten point gains in history this October.
On Friday, it was the financial sector that provided the strength for the markets, jumping more than 4% as a group. The markets benefited from more evidence of the thawing credit markets. The latest signs came from the widely-watched Libor rate, which fell sharply overnight to 0.4% from 0.73%. Libor, or the London interbank offered rate, is the benchmark short-term lending rate.
Financial stocks were up across the board but banking giant Morgan Stanley (MS) soared even further despite UBS cutting the bank's earnings outlook for the current quarter.Also, JPMorgan saw big gains after unveiling a temporary freeze on foreclosures and enhancements for a loan modification program.
Crude oil ended higher onFriday, putting a positive spin on the commodity's worst monthly performance ever. After a late-day rally, the price of a barrel of oil ended $1.85 higher to $67.81. For the week, crude ended up $3.66 -- the first weekly gain in four weeks.
The modest rally did little to erase a $32.83 plunge in October that weighed heavily on energy stocks.Crude oil has come under serious pressure as the markets worry a possible global recession will drastically cut demand.
The markets largely ignored a Commerce Department report showing personal spending tumbled 0.3% in September -- the worst monthly performance since June 2004. The report came as little surprise after the government revealed on Thursday consumer spending had its worst quarterly performance in 28 years last quarter.
The Commerce Department also said personal incomes rose by 0.2% last month, compared to consensus estimates for incomes to be unchanged.
Also, the University of Michigan/Reuters consumer sentiment index registered a 57.6 reading in October, well below the 70 reading in September. The decline was expected as the past month has seen the height of the financial crisis and increased calls for a deep recession.
Corporate Movers
General Motors’ (GM) efforts to merge with Chrysler LLC hit a snag after the White House shot down financial assistance for the potential deal, Reuters reported. The developments likely mean a merger can’t happen until after the election and also open the door for Chrysler to restart talks with the Nissan-Renault alliance, the wire service reported.
Google (GOOG) and Yahoo! (YHOO) are considering walking away from a Web-advertising alliance as early as next week rather than make compromises to address anti-trust objections from the Justice Department, The Wall Street Journal reported.
Barclays (BCS)plunged double-digit percentages to 52-week lows after the U.K. banking giant sold a 33% stake to Middle Eastern investors for $12.1 billion.
JPMorgan Chase (JPM) said it won’t put any additional loans into the foreclosure process over the next 90 days while it expands its mortgage modification program to Washington Mutual (WM) and EMC customers. The bank said the enhanced program is expected to help 400,000 families with $70 billion in loans.
Electronic Arts (ERTS)cut its full-year earnings outlook and unveiled plans to slash 6% of its workforce, sending its shares to 52-week lows.
Chevron (CVX) earned $3.85 a share last quarter, 60 cents more than what analysts were expecting from of the oil giant. Profits surged to $7.9 billion from $3.7 billion a year ago on revenue of $78.87 billion.
Clorox (CLX) reported a 15% jump in its fiscal first-quarter earnings but cut its sales outlook for the rest of its fiscal year. The cleaning products company’s adjusted-profit of 95 cents per share easily topped expectations of 84 cents.
American Express (AXP) warned in a Securities and Exchange Commission filing that recent turmoil in the global capital markets may "materially hurt business and results of operations." The company also said it doesn’t expect the markets to improve in the "near future” and that if performance weakens further its debt ratings could be cut, impacting access to capital.
Carnival (CCL) fell sharply to 52-week lows after the cruise line suspended its dividend and warned it experienced a further slowdown in booking volumes.
Sun Microsystems (JAVA) posted a wider-than-expected adjusted-loss of 9 cents per share last quarter as sales declined by 7.1% to $2.99 billion. The servers manufacturer didn’t give a forecast.
Burger King (BKC) posted an adjusted-profit of 38 cents in the third quarter, missing Wall Street’s expectations by a penny. However, the fast food giant maintained its full-year outlook.
Global Markets
London's FTSE 100 jumped 85.69 points, or 2%, to end at 4377.34 while France's CAC40 Index ended up 79.25 points, or 2.33% to 3487.07.
Also, global markets tumbled overnight even after the Bank of Japan cut interest rates by 0.2% in an effort to fight the slowing economy. Japan's Nikkei fell 5% and Hong Kong's Hang Seng dropped 2.5%.
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