Stocks surge as investors hunt for bargains

By TIM PARADIS, AP Business Writer

Tuesday, Oct. 28, 2008 | 1:07 p.m.

NEW YORK — Wall Street made another big late-day move Tuesday, barreling higher and lifting the Dow Jones industrials more than 700 points as bargain hunters, buying in anticipation of a Federal Reserve rate cut, grabbed stocks that have been pounded lower in recent sessions. All the major indexes were up at least 6 percent.

Investors looked past news of a sharp drop in consumer confidence, instead focusing on expectations that the Fed will cut its fed funds rate by half a point to 1 percent on Wednesday.

The market did fluctuate after the Conference Board said its index of consumer confidence has fallen to 38 in October, well below the 51 analysts expected. Wall Street is worried that consumers, whose spending drives more than two-thirds of economic growth, will keep pulling back, particularly as the holiday shopping season approaches - but with a litany of bad economic news this month, many investors expected the index to sag.

Investors were combing the market for beaten-down stocks after the Dow fell more than 500 over two sessions.

"This market is trying to bottom," said Terry Morris, senior equity manager at National Penn Investors Trust Co. in Wyomissing, Pa. "I think it's part short-covering and just being oversold and entitled to a rally."

By adding to its gains, the market seemed to be coming to terms with the fact that bad economic news will continue to stream in. Indeed, other casualties from the global credit crisis piled up Tuesday: Whirlpool Corp. said it will cut about 5,000 jobs by the end of 2009, Iceland said it needs $6 billion and Germany said Pakistan must secure a loan from the International Monetary Fund within a week.

Still, given the severity of the market's retreat in the past year, Morris contends little should surprise investors.

"We're in one of those times when the market has gone down more than the fundamentals," he said. "Therefore investors are expecting something bad like a recession but that's already built in."

In the final minutes of trading, the Dow rose 709.42, or 8.68 percent, to 8,885.19. The big moves weren't a surprise, given the huge swings stocks have shown in the past six weeks since the bankruptcy filing of Lehman Brothers Holdings Inc. Only two of the 19 trading days in October haven't ended with the Dow up or down by triple digits.

Broader stock indicators also surged. The Standard & Poor's 500 index rose 72.44, or 8.53 percent, to 921.36, and the Nasdaq composite index rose 116.58, or 7.74 percent, to 1,622.48.

The Russell 2000 index of smaller companies rose 26.60, or 5.93 percent, to 475.00.

Advancing issues outnumbered decliners by more than 4 to 1 on the New York Stock Exchange, where volume came to 1.12 billion shares.

"I guess we're just coming out of this oversold situation. I think you've got a lot of players on the sidelines," said Dan Demming, trader at Stutland Equities in Chicago. "There's just no one standing in a way right now."

He contends investors are also anticipating an interest rate cut.

But Matt King, chief investment officer at Bell Investment Advisors, attributed the rebound more to bargain hunting than to investor anticipation of a rate cut.

"The rate cut was a known quantity a few days ago," King said. "The market gets to the point where it's oversold, and reason comes over investors that are left, and those investors look for value and start to move into stocks and start to snap up the opportunities."

"The volume today is not overwhelming, that's a little discouraging. I don't think it's a massive move, and I don't think it will be a sustained move," King said.