President Barack Obama yesterday told Americans that his inauguration symbolized "hope over fear," but on Wall Street, investors stuck with fear.
The Dow Jones industrial average plunged 332.13 points yesterday to close below 8,000 for the first time since the end of November as the largest US banks continue to bleed cash and the Congressional Budget Office casts doubt on the effectiveness of an $825 billion proposal to spend the nation out of recession.
The Dow, which ended at 7,949.09, lost 4 percent of its value, the worst Inauguration Day loss in the 113-year history of the index.
Other indexes suffered steeper losses. The technology-heavy Nasdaq Composite shed nearly 6 percent, or 88.47, to close at 1,440.86. The Standard and Poor's 500 lost more than 5 percent, or 44.90, to end at 805.22.
The sell-off in stock markets, the worst so far this year, began before Obama took the oath of office at about noon. The rout underscored the depth of a recession that many economists expect to be the worst since the Great Depression, and the challenges inherited by Obama.
In the nearly three months between his election and the inauguration, the economy shed more than 1 million jobs and the number of unemployed surpassed 11 million. And despite the injection of $350 billion by the Bush administration to shore up the nation's banks and encourage more lending, the US financial system continues to teeter.
Today held much better news, although probably not for the long haul:
Stocks mounted an impressive comeback on Wednesday, one day after a deep selloff in the financial sector pulled the broader market downward.
As was the case in the market's move down on Tuesday, bank stocks led the way on Wednesday. Driven by double-digit percentage gains for Citigroup, Bank of America and J.P. Morgan Chase, the Dow Jones Industrial Average rose 279.01 points, or 3.5%, to 8228.10. Stocks strengthened as the session wore on, with the rally spreading beyond financials into several other sectors.
The blue-chip measure was also helped by an 11% gain for International Business Machines, which forecast full-year earnings that topped Wall Street's expectations and a 12% rise in fourth-quarter profit.
The S&P 500 gained 35.02 points, or 4.4%, to 840.25. Energy stocks in particular were strong amid a jump in crude-oil prices. Meanwhile, the Nasdaq Composite gained 66.21 points, or 4.6%, to 1507.07. Intel shares gained 3%.
Despite Wednesday's bank-led gains, the sector remains on a more than two-month long decline. Large financial firms are still susceptible to continued weakening of economic conditions and many still have bad assets left to write-down. Should banks fail to at least stabilize, investors say there is little way the market in general, can improve.