Wednesday, November 19, 2008

NEW YORK | Wall Street rebounded Tuesday in another turbulent session, as investors rushed back into the market after the Standard & Poor’s 500 Index tested a 2003 low.

The market, which had been down four of the past five sessions, has been volatile amid worries about how long a recession might be. That’s driven many retail investors to the sidelines, while big institutional traders such as hedge funds keep major stock indexes vacillating.

That was the case on Tuesday as stocks rallied in the final hour of trading. At least some of the buying was because fund managers whose portfolios are tied to the S&P 500 had to find a replacement for Anheuser-Busch Cos. The brewer was officially removed from trading at the market’s close after its takeover by Belgium’s InBev SA was completed.

Still underpinning the market were concerns that the economy has fallen into a recession that could be the worst downturn in more than two decades. A disappointing reading on wholesale prices and the housing market only confirmed this.

The Labor Department reported that wholesale prices plunged a record amount in October, a drop that could indicate a rising threat of deflation. Meanwhile, home builders’ confidence in a near-term housing recovery sank to a new low this month, according to the National Association of Home Builders/Wells Fargo housing market index. NAHB Chairman Sandy Dunn said the report “shows that we are in a crisis situation.”

Analysts said the market continues to search for an elusive bottom, and could yet again retest lows. The major indexes continued to attempt some sort of recovery from October’s devastating losses.

“We’re going to need more strength from here for a period of time to develop a convincing story that the market has bottomed,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

The Dow closed up 151.17, or 1.83 percent, to 8,424.75.

The Standard & Poor’s 500 Index rose 8.37, or 0.98 percent, to 859.12, after earlier drifting toward its 2003 low of 818.69. The Nasdaq Composite Index rose 1.22, or 0.08 percent, to 1,483.27. The Russell 2000 Index of smaller companies fell 3.79, or 0.84 percent, to 447.51.

Declining issues narrowly beat advancers on the New York Stock Exchange, where consolidated volume came to a light 5.9 billion shares. The fact that trading volume remains low is also a concern for analysts because that tends to skew the market’s moves.

Analysts warn not to take Tuesday’s gain as a sign the stock market is ready to stage a recovery. Many believe the economy has fallen into a recession that could be the worst downturn in more than two decades.

“There is no enthusiasm on the buy side right now,” said Joe Keetle, senior wealth manager at Dawson Wealth Management.

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