Stocks are resembling rubber balls thrown against brick walls - by hyper-active children, no less. No sooner did key financial and energy stocks in the United States and Canada get decimated on Tuesday amid fears of a banking meltdown and an energy glut, than many of these same names took off in the opposite direction on Wednesday.
Here are two examples. Suncor Energy Inc., down 15.8 per cent on Tuesday, up 11.2 per cent on Wednesday. Bank of America Corp., down 29 per cent on Tuesday, up 31 per cent on Wednesday.
The reversals helped drive a strong rally on major North American stock markets Wednesday. The Dow Jones industrial average closed at 8228.1, up 279.01 points, or 3.5 per cent. The broader S&P 500 closed at 840.24, up 34.02 points, or 4.4 per cent.
Financials surged, with Citigroup Inc. up 31.1 per cent and JPMorgan Chase & Co. up 25.1 per cent. Part of the new-found enthusiasm appears to come from the belief that the new administration of Barack Obama will move swiftly to support the wobbling U.S. financial system, perhaps by limiting the number of mortgage foreclosures.
However, drastic moves could leave the U.S. government taking big stakes in a number of banks, diluting existing shareholders in the process.
It may also have helped that directors of Bank of America and its chief executive officer, Kenneth Lewis, apparently bought more than half a million shares in the floundering financial firm on Tuesday, in a show of support.
In other moves, International Business Machines Corp. rose 11.5 per cent after the technology bellwether released a 2009 profit forecast that was better than analysts had been expecting. As well, Apple Inc. rose 5.9 per cent before the release of the company's fiscal first-quarter results, due after markets closed.
In Canada, the S&P/TSX composite index closed at 8757.89, up 252.96 points, or 3 per cent. There, financials also ticked higher, with Manulife Financial Corp. up 7.6 per cent, Royal Bank of Canada up 4.2 per cent and Toronto-Dominion Bank up 4.7 per cent.
Energy stocks were up on a jump in the price of crude oil, to $43.55 (U.S.) a barrel, up $2.71. Besides Suncor, Canadian Natural Resources Ltd. rose 3.9 per cent and Canadian Oil Sands Trust rose 4.4 per cent.