Wall Street stages late rebound

Wall Street rebounded today 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 has driven many retail investors to the sidelines, while big institutional traders like hedge funds keep major stock indexes vacillating.

That was the case today 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. The brewer was officially removed from trading at the market's close after its takeover by Belgium's InBev SA was completed.

Investors also used the market's big drop earlier in the session as chance to scoop up undervalued stocks. There was some encouragement about corporate earnings after Hewlett-Packard said fourth quarter and 2009 results will sail past Wall Street expectations.

But, underpinning the market were still concerns that the economy had 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 Labour Department reported that wholesale prices plunged a record amount in October, a drop that could indicate a rising threat of deflation. Meanwhile, homebuilders' confidence in a near-term housing recovery sank to a new all-time 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 continued to search for a much-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 surged 151.17, or 1.83%, to 8,424.75.

The Standard & Poor's 500 index rose 8.37, or 0.98%, to 859.12, after earlier drifting toward its 2003 low of 818.69. The Nasdaq composite index added 8.37, or 0.98%, to 1,483.27. The Russell 2000 index of smaller companies fell 3.79, or 0.84%, to 447.51.

There also remains uncertainty in the financial system as Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke were grilled on Capital Hill about their management of a US$700bn (€554.4bn) financial bailout.

Paulson told the House Financial Services Committee that the US has "turned a corner" in averting a financial collapse, but more work needed to be done.

Paulson also said during his testimony that the administration remained firmly opposed to dipping into the government's financial bailout fund for a US$25bn (€19.8bn) rescue package for Detroit's big three carmakers, no matter how badly they needed the help.