Wall Street rebounds on skidding oil prices

Wall Street rebounds on skidding oil prices

New York: Wall Street shook off a global market rout on Thursday in a powerful late rally as falling oil prices and easing credit markets helped soothe jitters a day after brutal losses for global stocks.

The Dow Jones Industrial Average vaulted 401.35 points (4.68%) to close at 8,979.26 in a session that saw an 800-point swing for the blue-chip index.

The sharp rebound from Wednesday’s selloff lifted the Nasdaq composite 89.38 points (5.49%) to 1,717.71 and the broad Standard & Poor’s 500 index 38.59 points (4.25%) to 946.43.

The market opened with steep losses amid weak US economic data and fresh turmoil in global markets including an 11% plunge in Tokyo’s main index. But the indexes started creeping back in late morning and the gains accelerated late in the day.

“A sharp drop in oil prices may be lifting the market’s mood," said Al Goldman at Wachovia Securities.

“The market also welcomed another drop in money market rates this morning."

Goldman said the market wobbled but was able to shrug off a recession-like reading on US industrial production in September, which fell 2.8%, and a sharp drop in a regional factory index from the Philadelphia Federal Reserve.

In a positive for equities, oil prices skidded again, with New York crude settling below $70 a barrel for the first time since August 2007.

More evidence of a thaw in credit markets also appeared, prompting investors to swoop in for bargains after Wednesday’s global rout.

Nathan Topper at Economy.com said there were signs of improvements in the credit markets that could eventually ease the financial turmoil, reflected in so-called credit spreads and the Libor interbank lending rate.

“Debt markets are showing signs of better health: Treasury yields are up and Libor is down," he said.

The market action came after Wednesday’s panic selloff and further declines in world markets including.

The Dow posted a 733-point drop on Wednesday, the worst one-day point loss for the blue-chip index since last month’s record 777-point decline and the steepest percentage drop since 1987.

Gregory Drahuschak, an analyst with the brokerage Janney Montgomery Scott, said some of the heavy selling Wednesday and early Thursday was “forced liquidations" by hedge funds and other portfolio managers as clients pull out cash.

This type of panic selling is “unnerving," he said, but will eventually be exhausted.

European exchanges fell hard shortly after the start of trade on Wall Street, where gloom deepened on news that the current banking and credit crisis had taken a sharp bite out of the manufacturing sector.

The Federal Reserve said US industrial production plunged 2.8% in September, the steepest decline since 1974.