In what could only be described as a very unique and wild day, the stock market gapped lower at the open and then charged higher to cut its losses significantly by the end of the day. World markets plunged yesterday and Dow futures were down almost 600 points at some times early this morning, but then the Federal Reserve stepped in with a big 75 basis point rate cut. Initially it appeared the stock market was going to shrug off this massive rate cut, but as the day went along those sectors that benefit most from lower interest rates bounced nicely. The Dow finished the day lower by 128 points. The Nasdaq fared worse, losing 48 points, or 2.04%. The S&P 500 lost 15 points, or 1.11%.
Today was one of those days where there was a wide variety in how the different sectors did. The financials and the capital goods sectors stood out on the upside and the technology and energy stocks were the weakest areas.
The financial sector opened the day drastically lower, but it was the single biggest reason for the intraday reversal in the major indices as strength continued to gain throughout the day in the financials. Wells Fargo & Company (NYSE:WFC) shares rose 5.57% and JP Morgan Chase (NYSE:JPM) gained 3.26% as major banks led the reversal. Brokerages also were strong today. Bear Stearns (NYSE:BSC) charged higher by 7.82% on strong volume. Morgan Stanley (NYSE:MS) had a huge intraday range of $42.57 to $50.13, but finished the day higher by 7.58%. CME Group (NYSE:CME) gained 4.05% on twice its normal volume and Nasdaq (Nasdaq:NDAQ) gained 6.84% on the day as the exchanges showed strength. KeyCorp (NYSE:KEY) reported better earnings than were expected and shares responded by popping 12.32%.
Capital goods stocks were higher today on strong volume. Deere and Company (NYSE:DE) finished with a huge gain of 8.84% on more than double its normal volume. Jacobs Engineering Group (NYSE:JEC) gained 5.26% after posting impressive earnings and raising 2008 estimates. Terex Corporation (NYSE:TEX) gained 2.51% after falling more than 5% at the opening bell. Homebuilders were also very strong today as investors felt that they could be huge beneficiaries of the rate cut. DR Horton (NYSE:DHI) gained 6.35%, though the volume was barely above average. Centex (NYSE:CTX) and KB Home (NYSE:KBH) both surged 8.8% and 8.42% respectively today.
Energy stocks were very weak today as crude oil prices fell and investors believe that further declines are likely in the wake of a likely U.S. recession. Chinese oil stocks were the biggest losers. Petrochina (NYSE:PTR) fell 9.38% and CNOOC (NYSE:CEO) fell 8.2%. Occidental Petroleum (NYSE:OXY) lost 4.35% and ConocoPhillips (NYSE:COP) lost 2.24% as U.S. energy companies were unable to escape the selling barrage. Baker Hughes (NYSE:BHI) also fell 2.55% on the day.
Tech stocks were also very weak on the day. Big name techs such as Oracle (Nasdaq:ORCL), down 6.3% and NVIDIA (Nasdaq:NVDA), down 4.7% were weak on the day. Garmin (Nasdaq:GRMN) continued its recent string of terrible performances, losing 5.76% on the day. Intuit (Nasdaq:INTU) and McAfee (NYSE:MFE) lost 5.46% and 2.72% as the software sector showed significant weakness.
The emergency fed rate cut may well have saved us from a massive down day today. I truly believe that today had the potential to be the type of day where the Dow lost 1,000 points. The writing was on the wall from the international markets and the beginning of the trading week is a common time for a market collapse. Fortunately the Fed realized that it had to do something now, not wait until next week, and moved aggressively.
The volume in the market today was very heavy. The NYSE racked up 2.6 billion shares of trading today, while the Nasdaq recorded a very heavy 3.2 billion. These are some of the highest trading volumes recorded in quite some time, especially the figure out of the NYSE.
Don't expect the volatility to stop here. I will be posting more later tonight about the emergency rate cut and what it means to you and what it means to the markets. Stay tuned to the RSS Feed for that information.
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