Huge rally at Wall Street

Dow comes back above 9,000 mark with its second highest one day gain

There was a late day huge rally at Wall Street on Tuesday, 28 October, 2008. There was extreme volatility since the start of the day. Though the market started on a strong note, it pared almost all of its gains within first couple of hours of trading. But then, with help of GM and Boeing, Dow managed to climb up again. Financials continue to be a laggard even today. But energy sector provided good support today despite crude prices closing marginally down. The sector got some good support from good earning reports from a couple of oil companies.

Bargain hunting and short-covering helped offset the weakest consumer confidence reading on record. Every major economic sector concluded the session with a gain.

The Dow Jones Industrial Average ended the day up by 889 points, to 9,065. The Nasdaq Composite Index, finished higher by 143 points at 1,649. S&P 500 finished higher by 91 points at 940.

All thirty Dow stocks ended in the green today. Alcoa, Boeing and GM were the main Dow winners today.

Boeing was up almost 15% today after it reached a four-year tentative labor agreement with its striking machinist union. The union, Boeing's largest, has been on strike since the beginning of September due to disagreements on compensation, benefits and job security. On the other hand, GM shares were up today on reports that the Department of Energy is working to arrange $5 billion in loans to the auto maker, which would help GM merge with Chrysler.

The Conference Board at USA reported today that U.S. consumer confidence plunged in October, reaching an all-time low. The current financial crisis hit the sentiment of consumers in US.

Despite falling gasoline prices, the October consumer confidence index fell to 38 from an upwardly revised September reading of 61.4. Expectations with the percentage of consumers expecting business conditions to worsen over the next six months rose to 36.6% from 21%, and those was expecting fewer jobs rising to 41.5% from 26.9%.

The report also stated that the present situation index fell to 41.9 from 61.1. The expectations index reached a record low in October, hitting 35.5, compared with 61.5 in the prior month.

In another important economic report today, The Case-Shiller home price index, published on Tuesday, 28 October, 2008 by Standard & Poor's showed that home prices in 20 major U.S. cities dropped 1% in August compared with July and fell a record 16.6% from the previous year. Prices have now fallen 20.3% from their peak in June 2006. Phoenix, Las Vegas was hit the hardest.

Credit conditions tightened significantly and foreclosures mounted in September and October.

Among major earning reports for the day, Whirlpool cut its 2008 forecast and announced it was cutting 5,000 jobs.

The energy sector provided good support today following better-than-expected results at Occidental Petroleum and Valero Energy. The sector is also getting an indirect boost from BP which posted stronger-than-expected earnings and revenue growth.

Crude prices rose fell by more than half a dollar on Tuesday, 28 October, 2008 and closed below the $63/barrel level as traders continued to doubt about energy demand in the coming months. There were also reports in the market that OPEC was thinking about another production cut. Crude-oil futures for light sweet crude for December delivery closed at $62.73/barrel (lower by $0.49 or 0.7%) on the New York Mercantile Exchange. Prices earlier touched a low of $61.61.

Volume on the New York Stock Exchange topped 1.7 billion, with advancing stocks overriding those declining more than 4 to 1. On the Nasdaq, nearly 1.3 billion shares traded, and advancers topped decliners 2 to 1.

Economic and earning reports will dominate tomorrow’s session. Durable goods orders for September are due ahead of the opening bell followed by the weekly crude inventory report. Other than that, tomorrow, the Federal Open Market Committee (FOMC) announces its latest decision regarding monetary policy and market is expecting a 50 bps to 75 bps cut in fed fund rate which currently stands at 1.5%.