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The red-hot stock markets continued their October surge on Wednesday amid a growing sense that the U.S. will easily avert a double-dip recession and Europe’s debt mess won’t spiral out of control. However, a late-day slide halved the session's gains and prevented the blue chips from climbing back into the black for the year.
The Dow Jones Industrial Average jumped 102.55 points, or 0.90%, to 11518.85, the Standard & Poor's 500 gained 11.71 points, or 0.98%, to 1207.25 and the Nasdaq Composite leaped 21.70 points, or 0.84%, to 2604.73. The FOX 50 added 8.86 points, or 1.01%, to 883.31.
While the Dow failed to close above the 11577 level needed to recapture positive territory for 2011, the markets extended what has been an incredible stretch of trading as bearish sentiment has faded. Highlighted by a 330-point Columbus Day surge, the blue chips have soared 863 points, or 8.1%, since hitting 2011 lows on October 3. Wednesday's big gains left the benchmark index at its highest level since August 31.
“The overall move has been really dramatic. I think it caught most everyone by surprise,” said Peter Kenny, managing director at Knight Capital Group.
There didn't appear to be any major triggers for the last-minute selloff from the day's highs, but some market players may have been attempting to lock in some gains after the big run up.
Most traders were more impressed by Wall Street's newfound resiliency, which was on full display Wednesday morning. The markets mostly shrugged off Alcoa's (NYSE:AA) earnings dud and Slovakia's initial failure to authorize the euro-zone's all-important rescue fund.
“I think that’s a testament to the shift in investor psychology in a week’s timeframe. If this had hit a week ago, we wouldn’t have seen the strength we started off with,” said Michael James, managing director of equity trading at Wedbush Securities. “The market continues to be dominated by traders and trader sentiment. As we’ve seen, that sentiment can shift from bearish to bullish in a pretty short time frame.”
Edward Dempsey, chief investment officer at Pension Partners, told FOX Business the market could be experiencing a melt-up. He pointed to a number of factors, including slumping bond markets, trailing defensive stocks and outperformance by high-risk stocks,
“The market was pricing in a Lehman like event…that hasn’t happened,” said Edward Dempsey, chief investment officer at Pension Partners. "You can have a melt-up in this environment, meaning the reaction off the low can be extremely violent.”
Buying really picked up steam after the Slovak opposition leader said his party has reached a deal to ratify the $600 billion rescue fund that is seen as crucial to stabilizing Europe's debt debacle. The comments come after the Slovak Parliament rejected the measure, which has been passed by 16 of the 17 euro-zone nations.
Underscoring expectations the rescue fund will eventually be approved, the euro rallied 1% to one-month highs against the dollar and European banks like Deutsche Bank (NYSE:DB) soared. Votes in favor of the stronger rescue fund and pledges to recapitalize the continent's banks have sent global stocks soaring in recent days.
While Alcoa started earnings season off on a disappointing note, many are still hoping for a better-than-expected performance from most of corporate America. Results from banking giant JPMorgan Chase (NYSE:JPM) and search titan Google (NASDAQ:GOOG) are expected later this week and PepsiCo's (NYSE:PEP) results beat the Street.
Wall Street continues to benefit from receding fears of a double-dip recession in the U.S. Those concerns have faded as recent indicators show stronger-than-expected growth in employment, manufacturing activity and retail sales.
“The economic data out of the U.S. has been pretty decent and suggests we are not in a recession,” David Joy, chief market strategist at Ameriprise Financial, told FOX Business. Joy, who said he has a year-end S&P target of 1250, down from 1345 previously, added, “There is a chance to break out to the upside here, but we have some heavy lifting to do.”
The S&P 500 has soared 9.83% since the October 3 lows, while the Nasdaq Composite is up 11.51% over that span. Almost all 30 Dow stocks advanced on Wednesday, led by Walt Disney (NYSE:DIS) and Bank of America (NYSE:BAC). The index's weakest players were McDonald's (NYSE:MCD) and Alcoa.
In the commodities complex, crude oil snapped a five-day winning streak, sinking 23 cents a barrel, or 0.27%, to $85.78. Gold jumped $21.60 a troy ounce, or 1.30%, to $1,681.90.
Research in Motion’s (NASDAQ:RIMM) BlackBerry outage spread to North and South America, deepening a third day of disruptions for the struggling company. Outages have also been reported in the U.K., Middle East, Africa, Brazil, Chile and Argentina.
PepsiCo (NYSE:PEP) narrowly surpassed estimates with a non-GAAP profit of $1.31 a share on a 13% rise in revenue to $17.58 billion. The food and beverage giant also backed its 2011 EPS growth target.
Liz Claiborne (NYSE:LIZ) leaped more than 30% after saying it has unloaded its namesake and Monet jewelry brands to J.C. Penney (NYSE:JCP) in a $267.5 million deal. Liz Claiborne said it is also exploring options for a new name.
Hewlett-Packard (NYSE:HPQ) is reconsidering a planned spinoff of its PC division due to new analyses that show it may be ill advised, The Wall Street Journal reported. The biggest concern is about the impact on H-P's buying power with component makers.
London's FTSE 100 gained 0.85% to 5441.80, Germany's DAX jumped 2.21% to 5994.47 and France's CAC 40 soared 2.42% to 3229.76.
In Asia, the Japanese Nikkei 225 fell 0.40% to 8738.90 and Hong Kong's Hang Seng leaped 1.04% to 18329.50.