Dow Soars Nearly 900 Points

The Dow Jones industrial average has closed up 889 points. Cheap stocks and a thawing out in the credit and commercial paper market contributed to the spike. The Dow is still down 36 percent from its high, however, and economic indicators are still weak.

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MICHELE NORRIS, host:

From NPR News, this is All Things Considered. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel. First, the financial news and NPR's Jim Zarroli in New York. Usually, when we turn to Jim, it's for another blood curdling tale from the crypt of Wall Street. And today, we had all the makings of another financial horror story. The new numbers on housing were dismal. Consumer confidence plunged to the lowest level ever recorded. So, Jim, how is it that we're talking about the stock market rallying today, and the Dow Jones Industrial is going up 889 points? What happened?

JIM ZARROLI: I don't know. You know, Robert, things are so volatile and crazy right now. It really can be hard to say for sure. What a lot of people - what sort of the conventional wisdom today is that, you know, prices have just come down so dramatically that, you know, stocks had become really cheap. If you look at all the ways, the measures that people use to value stocks, like the price to earnings ratio, you really have some very cheap stocks. And at some point, people just rush in to take advantage of that.

Now, another thing we're seeing is a real thawing out in the credit markets, especially in the commercial paper market. This is where companies go to raise money for things like meeting payroll when they need it. It's very important. The Federal Reserve decided to begin buying up commercial paper because the market has been completely frozen. It started doing so yesterday, and in the past day or so, we've seen a real surge in borrowing by companies.

SIEGEL: Well, do people on Wall Street think that all of this together, and the surge in stock prices today, means that investors are actually seeing an end to the turmoil in the markets?

ZARROLI: Well, I think people on Wall Street probably think that it's, you know, it's hard to draw too many conclusions from one day's movements just when things are so volatile. The Dow is still off 36 percent from its high. And the economic indicators are still just really bad right now. Consumer confidence is at a record low. That is a serious problem because it means, you know, consumers won't want to spend as much as they have. The housing market is still awful.

On Thursday, the Commerce Department is supposed to release third quarter gross domestic product numbers. They are really widely expected to show that the economy shrank during that period. And all of that is likely to weigh on the financial markets in the weeks to come. Investors have just become very anxious about where the economy is going, especially in overseas markets. We've seen a lot of disappointing corporate earnings reports, and, you know, people are scared.

SIEGEL: Well, tomorrow, the Federal Reserve is expected to decide what to do with interest rates. Are we expecting a big cut?

ZARROLI: Yeah, I think everybody pretty much expects the Fed is going to cut rates again. How much is the question, maybe half a percentage point. If it does this, it will be one more thing the Fed and the Treasury Department have done to try to get people lending, to spur growth, to get the economy out of the doldrums. The Fed has already cut rates a number of - I think, I believe seven times...

SIEGEL: Mm hmm.

ZARROLI: Since September of 2007. This is the sort of thing that normally works to spur growth and gets the economy going. But it has had a limited impact because the problem right now isn't that interest rates are too high. You know, they're actually on the low side already. The problem is that, even with interest rates so low, people don't want to lend. People are afraid to do business because they're really scared about where the economy is going. And when people and businesses are scared, you know, about where the economy is going, they stop doing business, no matter how low interest rates are.

SIEGEL: And again, the news today from the stock market, the Dow up 889 points in a huge rally. NPR's Jim Zarroli in New York, thanks.

ZARROLI: You're welcome.

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