On Wild Day, Dow Rallies In Final Minutes
ROBERT SIEGEL, host:
From NPR News, this is All Things Considered. I'm Robert Siegel.
MELISSA BLOCK, host:
And I'm Melissa Block. A fitting end today to a week of surprises on Wall Street. After dropping nearly 700 points, the Dow rallied late today. It says a lot about how bad a week it's been when we say the Dow closed down only about 100 points. Since its high one year ago, it's lost more than 40 percent of its value. From more on the market's performance today and over the past week, I'm joined now by Roben Farzad. He's senior writer for Business Week. And Roben, let's talk about the pattern today. A deep, deep drop in the morning and then a very late afternoon rally again. What happened?
Mr. ROBEN FARZAD (Senior Writer, Business Week): Look, how can you make light of a of more than hundred-point drop on the Dow by the close? Really, it's unprecedented. This morning we were down more than 600 points, about eight percent. And the market staged a really unprecedented comeback. We almost closed up by the afternoon until people decided they didn't want to take their risk into the weekend. But considering all the losses this week, you know, low three digits is a rather cold victory.
BLOCK: And we've talked about this over the last couple of days that late in the afternoon something strange happens and today, it was between about three and 3:30. You saw this huge rally in a big, big spike up - positive territory and then coming down again.
Mr. FARZAD: Yeah, because I think people have accustomed to the idea of the freaks coming out at night. I mean, all sorts of bad news, FDIC, bank closures. You get this terrible news in terms of a bank shutting down typically Friday afternoon at five, 5:30, Some sort of economy could collapse over the weekend. But having said that, it's amazing that 3 p.m. on such a tense Friday turned out to be so rather optimistic.
BLOCK: We're hearing about the term bottom formation capitulation, the notion that the market could be bottoming soon. How would you ever know if the market has hit bottom?
Mr. FARZAD: I'll tell you, from a personal perspective, I think whenever relatives start calling me and asking if they should sell everything, that's pretty much the best contrarian indicator in the world. I want to patent the Persian relative contrarian index. It's worked time and again with real estate, with tech stocks in 2000. And I had a 31-year-old cousin call me yesterday, hopefully she's not in the car listening to this. I rarely, if ever, speak with this cousin, I even forgot I knew this person. And she had to introduce herself and say, I'm at my broker's office. I want to sell everything. I'm down 20 percent. Well, I'm like, well, never live through 87, you didn't live through 98. That just might be that contrarian signal that ultimately everybody's looking for.
BLOCK: Roben, if you look at the numbers this week, which industries or sectors of the economy have taken the greatest hit?
Mr. FARZAD: Amazingly, oil has had one of its worst weeks ever because as everything is being taken out and shot in this market, I think promisingly for the economy, oil has plummeted. And Exxon Mobil is having a rough go at it. These things are approaching valuations they've just never seen. You've seen GM and the other automakers really coming to this point of reckoning that everybody is seeming to think that - was this is all a mirage, this economic expansion we've had for the past four or five years, were all these car sale numbers fictions on easy credit? So nobody is getting the benefit of the doubt and it's just been atrocious for them. And again the carnage continues in financials.
BLOCK: Now is there some expectation that at the G-7 meeting here in Washington that there will be some coordinated response that will restore confidence to the market and next week things will be back into positive territory?
Mr. FARZAD: Well, that's much easier said than done. The conventional wisdom two weeks ago was, we pass this $700 billion bailout and it's all hunky-dory again. Because we're putting a safety net under assets in the market and that obviously didn't work. I think fear has gotten the best of everyone right now, its shoot first, ask questions later. No one is giving the benefit of the doubt. Banks are not trusting other banks, people are not trusting other people. Stores are tightening credit terms. Right now, it's the exact opposite element on the pendulum that we saw a year ago with all the promiscuous lending.
BLOCK: OK. Roben Farzad, thanks very much.
Mr. FARZAD: Thank you, Melissa
BLOCK: Roben Farzad, senior writer for Business Week, in New York. Transcript provided by NPR, Copyright NPR.
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