Stocks end bleak January on high note

NEW YORK – Wall Street ended a frenetic January with a huge advance Thursday after investors set aside worries about bond insurers and grew more optimistic that the Federal Reserve’s interest rate cuts will indeed help lift the economy. The Dow Jones industrials rose more than 200 points but suffered its worst January in eight years.

The day’s trading emerged as a microcosm of the entire month, with the Dow first falling more than 190 points, and then by late afternoon, soaring more than 250. It capped a January that saw frequent triple-digit moves in the blue chips as investors alternately anguished about the fallout from the housing and mortgage crisis and celebrated any news that indicated the damage might be limited.

Still, the major indexes ended the month with heavy losses. The Fed’s 1.25 percentage points in interest rate cuts, designed to stave off a recession, ultimately gave Wall Street some reassurance that the economy might soon show signs of recovery – although the market gyrated after the latest 0.50 percentage point cut on Wednesday.

The Dow rose 207.53, or 1.67 percent, to 12,650.36.

For the month, the Dow lost 4.63 percent – its worst January since losing 4.84 percent at the start of 2000. Overall, January’s pullback was the steepest seen in any month since December 2002.

Broader stock indicators also jumped Thursday. The Standard & Poor’s 500 index rose 22.74, or 1.68 percent, to 1,378.55, and the Nasdaq composite index rose 40.86, or 1.74 percent, to 2,389.86.

The Russell 2000 index of smaller companies rose 17.81, or 2.56 percent, to 713.30.

Thursday’s rebound came even as reports on sluggish consumer activity and higher jobless claims reflected weakness in the economy. However, along with the Fed’s rate decision, Wall Street this week awaited the Labor Department’s January report on payrolls and unemployment. Due this morning, the report could shape sentiment because a strong job market is considered crucial to maintaining consumer spending, which accounts for more than two-thirds of U.S. economic activity.

Overseas, Japan’s Nikkei closed up 1.85 percent.

In Europe, London’s FTSE 100 closed up 0.73 percent, Frankfurt’s DAX lost 0.34 percent and Paris’ CAC 40 fell 0.08 percent.