With relative calm returning to Wall Street, stocks edged higher Wednesday on soothing words from Federal Reserve Chairman Alan Greenspan that this week’s market tumult might be good for the U.S. economy.
The Dow Jones industrial average rose a meager 8.35 points to 7,506.67, a veritable gurgle compared with Monday’s devastating 554-point plunge and Tuesday’s 337-point moonshot by the stock market’s best-known barometer. Broader stock market measures were mixed, with smaller-company stocks posting the best performance.
Even with Wednesday’s slight advance, most investors were impressed to see the market hold most of Tuesday’s big gains.
If not for Tuesday’s record volume of 2.83 billion shares traded on all U.S. markets, Wednesday’s 1.86 billion share volume would have been the busiest day in history.
Wednesday’s pace offered a chance to reflect on the market’s roller coaster ride. And for weary traders who’ve been working long hours, the relative lull provided an opportunity to relax.
As the dust settled, market analysts mulled whether this week’s events might have any impact on future trading.
The storied heroes of the week, mom and pop investors, apparently hung tough on Monday, either by choice or their inability to place an order by phone or computer amid the crush of trading.
“I feel with a big burp like we had, you’ve got to say, ‘Hold on,”’ said William Green, a retired executive from Libby Glass of Toledo, Ohio. “The way the big swings are, it could come back in a few days.”
Valid or not, that image of level-headed savers sitting tight during Monday’s carnage has cast a negative light on mutual fund managers and other institutional investors, who were accused of flooding the market with sell orders to meet an expected rush of withdrawals by their customers.
“The big misperception is that the public is always wrong. But the public is driving the flow of money into mutual funds and what they think is going to happen will happen,” said Tony Dwyer, chief equity strategist at Ladenburg Thalmann & Co.
The day began on an encouraging note as Asian and European investors took their cue from Tuesday’s rally in the United States. In Hong Kong, where the global financial crisis took hold last week, investors drove the main index stock index 19 percent higher. The Tokyo stock market rose 3.3 percent, Germany’s rose 6.3 percent, and London’s rose 2.4 percent.
Among other popular stock measures, the Standard & Poor’s 500 index fell 2.68 Wednesday to 919.17, and the technology-heavy Nasdaq composite index slipped 0.28 to 1,602.74. xxxx