Advertisement
YOU ARE HERE: LAT HomeCollections

Winning week for stocks gives market bulls hope

Advancing shares again outnumber losers on the NYSE amid signs of improvement in the credit market.

October 18, 2008|Tom Petruno | Times Staff Writer

Most stock indexes couldn't hold on to their early gains Friday but they still finished in the black for the week after three weeks of devastating losses.

The Dow Jones industrials were up as much as 301 points at their peak for the session but fell back to close off 127.04 points, or 1.4%, at 8,852.22.

Most broader indexes also were modestly lower for the day. The Standard & Poor's 500 index dropped 5.88 points, or 0.6%, to 940.55, while the Nasdaq composite index fell 6.42 points, or 0.4%, to 1,711.29.

But winners still outnumbered losers by 5 to 4 on the New York Stock Exchange. That marked the fourth day in five that so-called market breadth was positive, a trend that heartens the bulls.

For the week, the Dow advanced 401 points, or 4.8%, its biggest weekly percentage gain in more than five years. That followed a cumulative loss of 26% in the three previous weeks. The Standard & Poor's 500 gained 4.6% this week. The Nasdaq composite rallied 3.8%.

There were more signs of improvement in credit markets Friday, including another drop in the benchmark Libor, the rates charged on loans between banks.

After Monday's huge snap-back rally -- when the Dow rocketed 936 points -- the stock market plunged again at midweek. The Dow early Thursday fell through its five-year closing low of 8,451 reached on Oct. 10 but then rebounded to close higher for the day.

That looked like a classic successful "retest" of the lows, a pattern that suggests the worst is over, at least for the short term.

But by one measure, investors' fear level remains extreme. The VIX index, which measures expectations of near-term market volatility, set a record closing high of 70.33 on Friday, although that was below the all-time high of 81.17 reached intraday on Thursday.

The VIX historically has been a good contrarian indicator: The more frightened investors are, the more likely it is that the market is close to bottoming.

But before the last few weeks, a reading of 40 on the VIX had constituted extreme fear. The index blew through that level, and past 50, 60 and 70 as stocks continued to plunge.

The market spent the first half of Friday's session moving in and out of positive territory after the government said housing starts dropped by more than expected last month to the lowest pace since early 1991.

Demand decreased for Treasury bills, regarded as the safest assets around. That pushed up the yields on the securities, though they remained unusually low. The three-month T-bill yielded 0.82% late Friday, up from 0.41% on Thursday.

Among longer-term Treasuries, the yield on the 10-year T-note, however, was unchanged at 3.93%.

The dollar was mixed against other major currencies, and the price of gold fell.

--

tom.petruno@latimes.com

The Associated Press was used in compiling this report.

Advertisement
Los Angeles Times Articles
|
|
|