The close: Wow

RTGAM






Over the past two trading days, investors have asked themselves the same question during the closing minutes: What was that?


No, there wasn't a meltdown this time. On Tuesday, the question arose after North American stock market indexes staged an amazing late-day surge that delivered stunning gains for the day.


The Dow Jones industrial average closed at 9065.12, up 889.35 points, or 10.9 per cent. All 30 stocks in the index rose in a buying spree that sent the Dow shooting 450 points higher in the last 45 minutes of trading. The broader S&P 500 closed at 940.48, up 91.56 points, or 10.8 per cent. There, an amazing 489 stocks, or about 98 per cent of the index, ended the day higher.


Alcoa Inc. rose 19.3 per cent, Boeing Co. rose 15.5 per cent and Citigroup Inc. rose 14.3 per cent.


In Canada, the S&P/TSX composite index closed at 9151.63, up 614.29 points or 7.2 per cent. The index rose about 300 points in the final 45 minutes.


Manulife Financial Corp. rose 11 per cent, Royal Bank of Canada rose 5.9 per cent, EnCana Corp. rose 8.7 per cent and Research In Motion Ltd. rose 12.2 per cent.


Just as Monday's late-day meltdown had little news driving it, so, too, did Tuesday's late-day gains.


The Federal Reserve will announce its decision on interest rates on Wednesday, and many economists believe the central bank will deliver a much-needed half-point cut to the key rate, taking it down to just 1 per cent. According to Bloomberg, the futures market believes there is a 40 per cent chance that the Fed will cut rates by three-quarters of a percentage point. Still, even with a large cut, it is hard to imagine the market rallying on interest rates alone.


What makes the rally even more incredible is that it came on a day when reports showed that U.S. house prices continue to melt and U.S. consumer confidence hit a record low in October, suggesting weak consumer spending in the busy shopping season ahead.


Nonetheless, U.S. consumer discretionary stocks were among the big winners on Tuesday. Walt Disney Co. rose 11.9 per cent, Home Depot Inc. rose 14.1 per cent and McDonald's Corp. rose 9.4 per cent.