Stocks surge on relief over banks; Dow up nearly 400
— -- April got off to a big bang Tuesday after several financial giants raised money in moves some interpreted as a sign the credit crunch may be easing.
Taking the fact banks are fixing up their balance sheets as a good sign, investors drove the Dow Jones industrial average up 391.47 points, or 3.2%, to 12,654.36. The Dow, though, is still down 4.6% this year.
Powered by thrifts, diversified financial services firms and investment banks, the Standard & Poor's 500 index jumped 47.48 points, or 3.6%, to 1370.18. The only industry in the S&P 500 to fall was gold. Even after the day's gains, the S&P 500 is down 6.7%.
Tech stocks did best, with the Nasdaq composite index gaining 83.65 points, or 3.7%, to 2362.75. The Nasdaq is down 10.9% this year. The USA TODAY Internet index rose 4.2% to 135.70, but it still is down 14.7% for 2008.
Investors had become so pessimistic during the first quarter that the market was overdue for a bounce, says Rod Smyth, chief investment strategist at Riverfront Investment Group. "The inspiration (for the rally) is some feeling the credit crunch is starting to rescind," Smyth says.
But while the rally could last for months and even send the S&P 500 5% higher, eventually investors will realize the economy is still in recession, he says. "I'm happy to play the rally. But you have to be very careful to think it's all over and it's all going to be fine."
Michael Farr of Farr Miller & Washington is also skeptical. The rally was powered by investors with cash not wanting to be left out. But the problems plaguing the economy in the first quarter still exist. "The economy continues to be in recession. Consumers remain under pressure," he says.
Highlights:
Lehman jumped $6.70, or 18%, to $44.34 on its news and UBS rose $4.21, or 15%, to $33.01.
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