Tue, Oct 14th - 1:00AM
More Bailouts cause Dow Jones to recover 938 points
Tuesday October 14th - Wall Street stormed back yesterday from last week's devastating losses due to the American credit crisis,
sending the Dow Jones industrials soaring a nearly inconceivable 938
points after major governments' plans to support the global banking
system reassured distraught investors. The surge
in stocks comes after a dismal week on Wall Street that erased an
estimated $2.4 trillion in shareholder wealth.
The Dow by far
outstripped its previous record for a one-day point gain, 499, reached
during the waning days of the dot-com boom in 2000. All major indexes
rose about 11 per cent.
The Wall Street surge will be good news
for Canada, where the Toronto stock market was closed Monday for the Canadian
Thanksgiving holiday. Last week, the TSX lost more than 16 per cent of
its value, one of the worst weeks ever for the Canadian market, on
investor worries about falling commodity prices and a spreading
economic recession in the United States.
When trading resumes Tuesday, the Toronto market is expected to post major gains following the Wall Street jump.
The hope on Wall Street was that the market was finding a bottom after
eight sessions of losses that sent the Dow down nearly 2,400 points.
But while a rebound had been expected at some point, investors can
expect to see back-and-forth trading in the coming days and weeks as
investors work through their concerns about the banking sector, the
stagnant credit markets and the overall economy.
With the U.S. bond markets and banks closed
Monday for Columbus Day, it was difficult for investors to gauge the
reaction of the credit markets to actions by major governments. Even as they return to Wall Street, investors remain worried about the health of consumers and areas like the housing sector.
But the market did appear to take heart when the Bush administration
said it is moving quickly to implement its $700 billion (U.S.) bailout, including consulting with law firms about the mechanics of
buying ownership shares in a broad number of banks to help revive the
stagnant credit markets and in turn get the economy moving again. The bailout will increase this year's budget deficit significantly.
Wall Street was cheered by word that Canada will bailout Canadian banks to the tune of $25 billion and from the Bank of England which said it would
use up to $63 billion (U.S.) to help the three largest British banks
strengthen their balance sheets.
The Bank of England, the
European Central Bank and the Swiss National Bank also jointly
announced plans to work together to provide as much short-term funding
as necessary to help revive lending.
After a series of weekend
meetings in Washington of heads of the Group of Seven nations, the
gains in global markets signalled that investors found comfort from the
actions and pledges coming from government officials.