Dow Rallies To a Record Close; Credit Fears Easing
Citigroup, UBS Warnings Fail to Slow Stocks’ Advance
Washington Post Staff Writer
Tuesday, October 2, 2007; Page D01
NEW YORK, Oct. 1 — Stocks kicked off the fourth quarter with a strong rally Monday, with the Dow Jones industrial average closing at an all-time high despite warnings from two major investment banks that they would be hit by substantial losses from the ongoing credit crunch.
The rally came as investors bought shares of small companies and ventured back into the banking and housing sectors. These areas have been battered in recent months as investors sought safety in Treasury bonds and shares of multinational companies during the turmoil in the subprime mortgage sector.
The closest metaphor is a bunch of school-kids who have had their drugs confiscated, so they sulk and pound on the floor and feel sorry for themselves in the extreme—even promising they have learned something from the process.
Bingo. Their connection is back in town. Now we’ll see what has been learned.
The underlying conditions of a market in stress are not gone
- a weak (and daily weaker) dollar
- a deficit out of control
- disfunction in the labor markets
- and horrors yet to come in mortgage foreclosures
Yet there’s a strong rally in the markets because the drugs are back on Wall Street, money to play with. Let the good times roll.