The stock market accomplished one thing yesterday — a big gain — but not without wild swings. Let’s see if another sizable gain can come today, but without such nerve-wracking volatility.
The Dow Jones industrial average surged more than 429 points, its tenth-highest point gain in history and the biggest since March 2009, Associated Press writes. It was just one day after the Dow had its worst point decline since 2008.
Credit the Fed.
The Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013, AP reports.
Bob Doll, chief equity strategist at BlackRock, said the Fed’s decision to hold interest rates at a very low rate for two years is “unprecedented” and called it a kind of “backdoor quantitative easing,” AP writes. In June, the central bank finished a second round of buying Treasury securities, also known as quantitative easing, in hopes of boosting the economy.
“Markets are going to do what they would have done if the Fed went out and bought securities,” Doll said. He said he expects investors will return to stocks after the broad sell-off of the least few weeks.
He expects stocks to continue to rally because a slow-growing U.S. economy won’t harm corporate profits, AP writes. As a whole, the companies in the Standard & Poor’s 500 index reap more than half their revenue overseas. What’s more, companies have already cut costs significantly, have hoarded cash and squeezed more production out of workers. Even as the U.S. economy has slowed, the S&P 500 as a whole was expected to earn record profits this year, AP writes.
In the AJC:
In other media:
– Henry Unger, The Biz Beat
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