In Spite of the August 8 Rally, the S&P 500 is Down 20 Percent from the Recent High Closing Set on April 29 and is in Negative Territory for the Year

Wall Street Roars Back in Wild Trade After Fed Meet

As a result of Monday's huge sell-off, the S&P 500 posted its worst one-day percentage loss since December 2008. And in spite of Tuesday's rally, the three major U.S. stock indexes are still in negative territory for the year. The S&P 500 came within a few points of entering a bear market -- or a 20 percent decline from its recent closing high set on April 29. Even some investors hoping for action from the Fed acknowledged the central bank's options appear to be limited because the current crisis is not liquidity-driven, as it was in 2008.

August 9, 2011

Reuters - Stocks rallied on Tuesday in a volatile session as investors struggled to decipher the Fed's signals on the economy after a dizzying two-week slide.

Buying accelerated into the close and the S&P 500 posted its best day in more than two years, following a drop of nearly 17 percent over the past weeks.

The market reversed direction six times after a Fed statement that pledged two more years of near-zero interest rates.

Bank shares roared back from recent losses with the KBW capital markets index up 6.7 percent.

"The last three or four weeks, the stock market has really discounted a mild recession," said Mohannad Aama, managing director at Beam Capital Management LLC in New York.

"Now after the Fed announcement, the market has to start factoring in what the response from the Fed and the government will be. There is still a small chance for a fiscal stimulus aimed at job creation. The FOMC statement today was positive for equities."

The Dow Jones industrial average gained 429.92 points, or 3.98 percent, to end at 11,239.77. The Standard & Poor's 500 Index rose 53.07 points, or 4.74 percent, to 1,172.53. The Nasdaq Composite Index added 124.83 points, or 5.29 percent, to 2,482.52.

About 16.4 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq -- more than twice the daily average so far this year of 7.75 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of almost 12 to 1, while on the Nasdaq, almost five stocks rose for every one that fell.

The three major U.S. stock indexes, though, are still in negative territory for the year, in spite of Tuesday's strong rally.

At its session low after the Fed statement, the S&P 500 came within a few points of entering a bear market -- or a 20 percent decline from its recent closing high set on April 29.

According to a Reuters poll, the United States faces one-in-four odds of slipping back into recession, though the economic outlook was seen as raising the likelihood of new Fed action.

Even some investors hoping for action from the Fed acknowledged the central bank's options appear to be limited because the current crisis is not liquidity-driven, as it was in 2008.

Equities suffered a massive drop on Monday, the first session since the United States lost its top-tier triple-A credit rating from Standard & Poor's. As a result of Monday's huge sell-off, the S&P 500 posted its worst one-day percentage loss since December 2008.

Wall Street Rallies After Sell-off

August 9, 2011

Reuters - Stocks rebounded sharply on Tuesday after a major sell-off, but markets remained vulnerable to selling if the Federal Reserve fails to ease fears of a double-dip recession.

Volatility remained high after the benchmark S&P 500 dropped nearly 17 percent over the past two weeks on wrangling in Washington over the debt ceiling and soft economic data. Stocks almost immediately lost gains after the open and the Dow briefly turned negative before rebounding.

Equities suffered a massive drop on Monday, the first session since the United States lost it top-tier credit rating, with the S&P posting its worst one-day loss since December 2008 and nearing bear market territory. Volume was the heaviest since the "flash crash" in May 2010.

"You had a cataclysmic sell-off in the marketplace," said Cliff Draughn, president and chief investment officer at Excelsia Investment Advisors in Savannah, Georgia.

"You are technically way oversold and secondly, this whole thing has been political."

The Dow Jones industrial average gained 174.75 points, or 1.61 percent, to 10,984.30. The Standard & Poor's 500 Index rose 25.87 points, or 2.31 percent, to 1,145.33. The Nasdaq Composite Index climbed 74.50 points, or 3.16 percent, to 2,432.21.

Federal Reserve policy-makers began meeting Tuesday morning, and the Fed's statement is due at 2:15 p.m EDT. While the central bank isn't expected to unveil any new program to help lift asset prices, selling could re-emerge if there's no indication that help is on the way.

Analysts were conflicted over what to expect from the statement, as some were unsure what action, if any, the Fed has left at its disposal.

"He's damned if he does and damned if he doesn't -- he's in a no-win situation this afternoon," Draughn said.

The CBOE Volatility index fell 15.2 percent, but was still up nearly 59 percent so far this month.

Standard & Poor's downgraded the U.S. credit rating late Friday, removing the nation's perfect triple-A designation for the first time in history. The rating agency's move sparked the stock market's huge sell-off and underlined fears a recession was inevitable, given increasing signs of slowing growth and more turmoil in the euro zone.

According to a Reuters poll, the United States faces one-in-four odds of slipping back into recession, though the economic outlook is raising the likelihood of new Fed action.

Even though fear remained a dominant emotion in the markets, analysts said stocks could be nearing a bottom. They noted the S&P 500 was now more technically oversold than at any other time in the last 10 years, with its 14-day relative strength index at 16.5 percent. A level below 20 generally attracts buyers.

Bank shares ranked among the best performers, as the S&P financial index gained 4.1 percent. Bank of America Corp, the S&P's biggest decliner on Monday, jumped 7.5 percent to $7.