Stocks sink, ending a three-day rallyNEW YORK — A three-day stock rally ended much like it began, with a steep and sudden turn. Stocks started higher early Thursday but turned lower within 20 minutes.
By: By Matthew Craft, The Associated Press, The Jamestown Sun
NEW YORK — A three-day stock rally ended much like it began, with a steep and sudden turn.
Stocks started higher early Thursday but turned lower within 20 minutes. Indexes in the U.S. and Europe sank after Germany’s main stock index, the DAX, suddenly dipped 4 percent. Traders struggled to explain the dive.
The Dow Jones industrial average fell 170.89 points, or 1.5 percent, to close at 11,149.82. It had been up 85 points shortly after the opening bell.
Bank of America Corp. jumped 9 percent on news that Warren Buffett will invest $5 billion in the troubled bank. BofA had lost half its value this year as investors grew worried about its need to raise capital and its growing liabilities related to subprime mortgages.
Other banks also rose after the billionaire investor gave his backing to Bank of America. Morgan Stanley gained 2.7 percent and Citigroup Inc. 4.8 percent. BofA and American Express Co. were the only companies in the Dow to rise.
This week’s trading has been marked by a series of sudden reversals. Robert Stein, a money manager responsible for $1.2 billion at Astor Asset Management, said questions about the economy have made investors uncertain and the stock market more volatile. Gains made one day can disappear the next, or even in the same day.
“We’re not seeing anything that’s convincingly bearish enough to call another recession, but nothing optimistic enough to suggest that a recovery is going to regenerate,” Stein said.
Friday could be another day of big swings as Federal Reserve Chairman Ben Bernanke gives a highly anticipated speech at a conference in Jackson Hole, Wyo.
Earlier Thursday, the government reported an increase in the number of first-time claims for unemployment benefits last week. The Labor Department said applications for benefits rose to 417,000, the highest in five weeks. The figure was inflated by a strike at Verizon which ended earlier this week.