Wall Street staged a shocking comeback after a steep morning selloff Wednesday, propelling the Dow Jones industrials up 488.95 points, as investors scooped up bargain-priced stocks amid encouraging news.
The Dow Jones Industrial average gained a whopping 488.95 points, or 6.35 percent, at 8191.29, according to the latest data — the blue-chip gauge's second-largest point gain ever.
The tech-loaded Nasdaq Composite Index added 61.18 points, or 4.98 percent, to 1,290.23 after tumbling 3 percent in the morning. The Standard & Poor's 500 climbed 45.73 points, or 5.73 percent, to 843.43.
The arrest of the founder of Adelphia Communications Corp. (ADLAE) on charges of looting the now-bankrupt cable company lifted the spirits of investors demoralized by a string of corporate scandals. An agreement between House and Senate negotiators on legislation to crack down on corporate fraud also drove the rally.
"At some point people get sick of fear and take a stab," said Brian Pears, head of equity trading at Victory Capital Management. But, like others, he was wary of the rally. Market watchers note that many powerful advances have been short-lived rallies in the bear market that began in 2000.
"Even dead cats bounce," said James Volk, director of institutional trading at D.A. Davidson and Co. "I don't think there's been any change in the psychology, and that's what you really need to get changed before we do any better."
For the Dow and the S&P 500, the rally represented the largest one-day percentage gains since Oct. 21, 1987 when the Dow rose 10.1 percent and the S&P surged 9.1 percent in the wake of the stock market crash earlier that month.
The market had another volatile session in extremely heavy trading. A record high 2.7 billion shares changed hands on the Big Board and more than 2.4 billion on Nasdaq. Volume has surged in recent days as investors struggle to discern their next move after days of declines. It was the first time more than 2 billion shares were traded for four days in a row in NYSE history.
J.P. Morgan (JPM) surged 6 percent after the financial giant's chairman said it acted properly and with integrity after congressional investigators said it and Citigroup helped hide massive debt at bankrupt energy trader Enron Corp. Standard & Poor's gave another boost to the stock by calling worries over the Dow member's liquidity positions "unfounded."
Aiding a sense of corporate house-cleaning was news of the arrest of three members of the founding family of Adelphia Communications Corp. (ADLAE), which filed for bankruptcy last month.
Government officials led the related executives away, claimed they "looted" the company they created over 50 years ago. Two other former executives also were arrested on federal securities and bank fraud charges.
Other bits and pieces of news propelled the market. President Bush will consider new measures to boost the U.S. economy should it take a turn for the worse, his budget director said.
U.S. lawmakers also boosted sentiment by reaching final agreement on a massive corporate reform measure, preserving much of a Senate bill requiring stricter oversight of auditors but adopting stiffer criminal penalties passed by the House.
Bargain hunters swooped into the market after stocks sank to new five-year lows in the wake of days of wrenching selling. But market watchers were skeptical of the market's sudden spike, recalling investors' habit of selling into rallies to lock in profit in the bear market.
"We've just had this relentless selling. I think this is a relief rally," said Tim Heekin, director of trading at Thomas Weisel Partners. "It was triggered by a combination of asset allocation and technicals and in the past these rallies have only lasted a day and a half or two, so time will tell.
"Frankly, I think there's too much negative news out there that's going to prevent this market from going up a lot."
The Dow drew fuel from Exxon Mobil Corp. (XOM), up $3.01 at $33.93, after Banc of America Securities (BAC) raised its rating on the oil giant, saying its stock price looks attractive. Drugmaker Merck & Co. (MRK) also lifted the Dow, jumping $3.55 to $42.60, or 9 percent, after approving a new $10 billion stock repurchase program.
"We have been so oversold in this ugly market we are certainly overdue for this kind of bounce but we had three or four of these big rallies this year with no followthrough so the real test is what happens in the days and weeks ahead," said Michael Kayes, chief investment officer of Eastover Capital Management.
"Companies are in there buying their stocks and that has helped, and others are saying they will sign their financial statements or expense options, so there's bits and pieces of news that are helping."
J.P. Morgan rose $3.22 at $23.30, boosting the Dow, after hitting its lowest level since 1996 early in the day. The Dow member spiked as high as $23.65 as it fought back after news of a congressional probe into business practices at the company and Citigroup (C). Standard & Poor's then reiterated its credit ratings on J.P. Morgan and Citigroup, saying worries about a cash shortage were "unfounded." Citigroup, another Dow issue, rose $2.59 to $29.59.
Halliburton Co. (HAL) oared 23 percent, or $2.10, to $11.20. The world's No. 2 provider of oilfield services posted a loss of almost half a billion dollars, after a charge, but the shares jumped as investors welcomed its attempt to quantify future asbestos liabilities.
The Russell 2000 index was up 14.57, or 4 percent, Wednesday to 378.56.
Overseas, Japan's Nikkei stock average fell 2.6 percent. In Europe, stocks were mixed. Germany's DAX index rose 3.3 percent, recovering from a steep drop earlier. Britain's FTSE 100 fell 2.1 percent, and France's CAC-40 lost 1.5 percent.
The Associated Press and Reuters contributed to this report.