That's really all there is to it. The bump in the DJIA came on the heels of an even larger increase in the Hang Seng Index (the Honk Kong exchange) fueled, at least according to media reports, by bargain hunting investors. The thing is, these stories tend to feed on themselves - it probably started in Asia and encouraged other people to jump on the bandwagon and make a few extra bucks in the process. The FTSE (London exchange) responded similarly, and by the time the New York exchange opened it was no longer rumor, life had imitated art (or media, in this case) and the bargain hunting was a fact.

The problem is that short term profit takers aren't putting their money back into the market because they believe in the long term potential of US businesses. Honestly, one would assume that anyone that foolhardy had already been parted with their money. They're doing it because they know that even a large contraction isn't without its short term bumps, and they're hoping to time things right on both ends - making money by getting in before the short term increase, and then selling short at its peak when things inevitably go down again.

I wouldn't believe that it's a barometer of the strength of the US economy. It's just people taking advantage of large volumes of stock movement and gambling on short term profits.

into the US economy from the developing nations', as we're seeing signs of credit becoming available at the institutional level, and they are having trouble. Also, there may simply be some bargain hunting going on.. I for one have been snapping stocks up all month with absurdly low valuations.

That's with a capital V

I found myself stunned to return to work yesterday from voting early and learn the market rose nearly 11% by the end of the session. I work in finance so I am acutely aware of how grim the economy is right now. I think one explanation for yesterday's odd rise is based on history.

The 10.8% rise in the Dow yesterday was the 7th biggest percentage gain in the Index's history. On the list of top ten percentage gains, we find dates from 1929, 1931, 1932, 1933 (during the Great Depression of course); September 1939 (the aftermath of Germany's invasion of Poland); October 1987 (after a 22% drop based on a technical glitch); and sixteen days ago (October 13). What unites all of these dates is that the huge gain came on the heels of tremendous events, all negative. Excluding October 1987's gain (which was incidentally smaller than yesterday's), conditions worsened further after the rise.

Many market participants, including the mutual fund industry, stock analysts, and the majority of individual analysts, have a long stock bias. They search desperately for reasons why stocks are a good investment now, even if it appears to be clear that they are not. Yesterday the sellers may have taken a bit of a breather, or market sentiment may have just briefly swung towards optimistic. God only knows, and He does not run any mutual funds I know about. I would posit that yesterday's rise will be short-lived, and not the start of a market recovery. I think there is much more pain for the global economy to endure.

Was that Finance 101 class you sat in on that one day not focused on efficient markets?

Guess what? The global recession? Is old news. It's been out there. So you shouldn't expect the market to just sink slowly, day-by-day, as the economy contracts. If it behaved that way, then people would see this pattern and start selling short.

The state of the global economy is already factored into the recent dramatic plunge in equity values. A big upward bump just implies that some investors think that maybe people are overreacting and that prospects, while gloomy, are not as gloomy as some people think.

I mean, Jesus H. Christ, everyday is another something to juice the economy. It'll be interesting to see how history judges this insanity.

There's nothing to go figure here. It's just like a little rubber ball bouncing down the stairs. As I've said before, Capitalism is a fancy cross between a ponze scheme and a poker game; this is the poker game part of this in play right now. Buy low sell high, over 'n over 'n over - bounce, bounce, bounce goes the little rubber ball down the stairs.

Someone is making big, big bucks off of this present situation, and it ain't me and probably ain't you either. Now, Warren Buffet and people of his income level are doing just fine.

Mister Leonard, You must not have had your coffee yet.

Really? C'mon!

Interest-rate cut is expected as Federal Reserve convenes

by The Associated Press

Tuesday October 28, 2008, 4:42 AM

"It is all but certain the Fed will cut rates -- for the second time in this month alone. The big question: Just how low will the Fed go?"

The promise of another rate cut, likely to arrive today, would seem to be yet another de facto acknowledgment of more hard times to come.

This is how Greenspan blew successive bubbles--by lowering interest rates. Of course, it probably won't work this time, but it gives the market some temporary juice.

Over and over again, for years on end, the market has reacted to interest rate cuts like they're lines of coke. No surprise that it would react the same way again.

And now it oscillates between 900 and 950 or so.

jackuws said what I was going to say (but more articulately).

The markets are completely out of whack right now. We may well see another steep decline tomorrow, a rally after the US elections, and then another decline when people realize that Obama (or McCain???) doesn't have a magic wand.

If the market was rallying day after day, that would be euphoria. This is just twitchiness.

Don't look at daily moves, look at y-t-d and one-year-ago numbers. Does it look like the market's up?

What are they going to cut rates too. -1%. Is the Fed going to give banks an extra $1,000 for every million they borrow.

Rate cuts are designed to spur DEMAND for loans. The problem is not demand. Lots of people want cash (just look at the line of beggars at Paulson's door).

The problem is SUPPLY. Banks have bad balance sheets. They don't have enough secure capital to make loans. They need a reason to give money. They need to be recapitalized and they need to be comfortable that they will make a reasonable return on those loans.

Cutting rates does NONE of those things. It decreases the value of savings, driving people away from putting cash in banks (less available capital), it cuts the rate of return on loans (again less money in the door).

The Fed either should hold rates where they are or better yet raise rates to 3-5%.