NEW YORK -- Wall Street got the interest rate cut it wanted, but still turned in a baffling late-day performance Wednesday, shooting higher and then skidding lower in the very last minutes of trading as some investors rushed to cash in profits after the market's big advance. The major indexes ended the day mixed, with the Dow Jones industrials falling 74 points — only the third time in October that the blue chips had just a double-digit close.
Analysts were divided over why the market turned around so abruptly, with some citing reports of a lackluster profit forecast at General Electric ge— a Dow component that dropped nearly 4% from its late-session high — and others contending investors were simply looking to cash in gains after the Federal Reserve's decision to lower its fed funds rate by a half-point to 1%.
"It was a panic sell in the last two minutes," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York, referring to reports that GE was aiming at 2009 profits to be little changed from 2008. The reports were subsequently called into question, and a GE spokesman said the statements were taken out of context.
A spokesman for GE said that the Dow Jones report quoting Chief Executive Jeff Immelt as forecasting flat profit in 2009 was "completely out of context and inaccurate."
Immelt's comments, made at a business group dinner in Spain, were a response to a hypothetical question about how to motivate managers during a time of financial crisis, said Russell Wilkerson, a GE spokesman.
"There was no forecast, no guidance given here," Wilkerson said.
Because of the last-hour confusion, it was likely that it would take the opening of trading on Thursday to get a better read on how the market feels about the Fed's rate cut and its accompanying economic statement. At the same time, the Commerce Department's expected reading on the gross domestic product for the third quarter will most likely shape trading.
The market waffled while it was still digesting the Fed's economic assessment statement that accompanied the rate cut, but advanced for most of the final hour of trading. Policymakers spelled out a weakening of economic conditions in the U.S. and abroad, citing first a drop in spending by American consumers.
The Fed also reiterated that it expects government steps, including its own efforts to increase liquidity, to improve credit market conditions and the economy over time.
Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, said the Fed's overall tone conveyed it regards the economic troubles as somewhat typical of a weak economy and not the kind of intractable problems that signal a deep recession is imminent.
"They more or less indicated elevated concerns about the economy but nothing in it suggests any real panic but that this is just one more step in their program to restore the financial system to complete functioning."
Not all observers saw the Fed's action as likely to aid the markets, at least initially.
"I think this 50 basis point cut (0.5 percentage point) was more symbolic than substantive," said Ed Hyland, managing director and global investment specialist in J.P. Morgan Private Bank. "It makes borrowing more cheap, but it doesn't necessarily help you find a willing lender. What the economy needs is willing lenders, people comfortable taking risk. It will take time for that to loosen up."
The Dow Jones industrials were up nearly 280 points in the last quarter hour of the session, giving them a two-day gain of more than 1,160 points, when another bout of last-hour volatility wiped out the advance. The market's trading drew all the more scrutiny a day after an 889-point surge in the Dow Jones industrials Tuesday, its second-largest daily point gain after the 936-point surge on Oct. 13 that later evaporated as fears about the economy grew. The stock market has been extremely volatile lately — beyond a simple case of investor indecision, Wall Street's back-and-forth moves may also be part of its attempt to establish a bottom.
"We set ourselves up in the last hour with a golden opportunity to lock in profits," said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.
He said that very late in the day, more investors were putting a somewhat downbeat spin on the Fed's statement, which Larson said indicated policymakers are willing to lower the fed funds rate below 1% if necessary. Traders started thinking, "if they're willing to go under 1%, there must be serious problems that we don't know about yet," he said.
The Dow ended down 77.26, or 0.85%, at 8,987.86.
Broader stock indicators were mixed. The S&P 500 index fell 10.42, or 1.11%, to 930.09, but the Nasdaq composite index advanced 7.74, or 0.47%, to 1,657.21.
Advancers outnumbered decliners by about 2 to 1 on moderate volume of 1.62 billion shares on the New York Stock Exchange.