Dow Jones Has Record Finish

by Darren

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Just when you thought everything was looking bad, investor sentiment rallies and the Dow Jones industrial average ends up finishing above 14,000. Investors have suddenly convinced themselves that the worst of the credit crisis is now behind Wall Street and “go go” days are right around the corner.

While the beginning of the new quarter was an incentive for institutional investors to buy, the market was also encouraged that the worst might be over from the summer’s credit and stock market turmoil. And new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting.

Investors bought financial shares on the belief that the industry has generally weathered the recent credit market upheaval. Both Citigroup and Switzerland’s UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.

Investors are also now getting behind the idea that the Fed will probably end up cutting interest rates again, in a further effort to speed up the economic recovery. “People are getting more confident there is going to be an October rate cut,” said John C. Forelli, portfolio manager for Independence Investment. “To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That’s underpinning the financials.”

Now we’ll see if the optimism even lasts the week.

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