The twists and turns of a turbulent week on Wall Street have made traders dizzy, but analysts are looking for a calmer ride in the coming week as the market digests the latest efforts to battle the financial market firestorm.
The mood has shifted from panic to euphoria as the financial system froze up. But some say the crisis in markets shows signs of easing.
The major US indexes ended little changed despite the unprecedented volatility.
The blue-chip Dow Jones Industrial Average fell 0.29 percent on the week to 11,388.44 after big rallies on Thursday and Friday recouped heavy losses earlier in the week.
The broad-market Standard & Poor’s 500 index rose 0.27 percent to 1,255.08 and the technology-heavy NASDAQ composite managed a gain of 0.56 percent to 2,273.90.
“I’m not sure I’ve ever seen such volatility,” said Andy Brooks, head of trading at T. Rowe Price, after one hectic back-and-forth session.
The historic week came as Wall Street giant Lehman Brothers collapsed after failing to find a buyer and the US government offered an US$85 billion lifeline to insurance giant American International Group Inc to stave off a financial market tsunami.
Meanwhile Merrill Lynch made an emergency deal to sell itself to Bank of America.
The government action failed to calm financial markets and at midweek credit markets appeared to seize up, forcing central banks to offer massive amounts of liquidity to the banking system. At one point, investors flocked to gold, oil and short-term Treasury bills in a massive flight to safety.
Amid the firestorm, the US government announced a plan described as “the mother of all bailouts” in an effort to help banks and financial firms purge their books of the so-called toxic mortgage assets stemming from the housing market collapse. The plan appeared to help skittish markets settle down.
“Wall Street appears to have turned the corner,” said Fred Dickson at DA Davidson & Co, reacting to what he called “a package designed to attack the problems at the heart of the financial crisis and reduce the general level of fear that has move moved onto Main Street.”
“While we doubt the comprehensive plan, in whatever form it finally emerges from Congress, immediately ends the housing crisis or will get the economy back on a more traditional growth track, it should provide stability to the stock market and restore confidence to the global banking system,” he said.
Bond prices were lower after sharp swings over the week.
The yield on the 10-year Treasury bond rose to 3.769 percent from to 3.730 percent a week earlier, and that on the 30-year bond increased to 4.366 percent from 4.326. Bond yields and prices move in opposite directions.
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