‘Herd mentality’: Stocks stage a huge rebound

The biggest gainer among the 30 Dow companies was Chevron Corp.

NEW YORK (AP) — Investors did an abrupt turnaround on Wall Street Thursday, muscling the Dow Jones industrial average up more than 550 points after driving it down to its lows for the year on a stream of negative economic and corporate news.

After three days of selling that wiped out about $1 trillion in shareholder value, many investors, though nervous about the economy, appeared convinced the market had priced in enough bad news. So when the Standard & Poor’s 500 index — the indicator most watched by traders — managed to recover from multiyear trading lows, buyers swarmed back in.

It’s “a herd mentality,” said Ryan Larson, senior equity trader at Voyageur Asset Management. “We started going higher — and you don’t want to be the last one on the boat.”

Some analysts also said investors were positioning themselves ahead of a meeting of Group of 20 leaders in Washington. The meeting could bring decisions on mending the troubled global financial system. The G-20 includes the U.S., Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

There was “some anticipation that we’ll hear some good news from that meeting,” said Jack A. Ablin, chief investment officer at Harris Private Bank. Thursday’s rally was “part hopeful, part technical. But certainly welcome.”

As stocks rallied, so did oil prices, sending shares of energy companies higher. The biggest gainer among the 30 Dow companies was Chevron Corp., which rose $8.43, or 12.5 percent, to $75.71. Another big gainer was Exxon Mobil Corp., which climbed $6.48, or 9.4 percent, to $75.41; these two energy stocks represented one-fifth of the Dow’s point gain Thursday.

The price of a barrel of light, sweet crude rose $2.08 to $58.24 on the New York Mercantile Exchange, after falling to the lowest levels since January 2007. Oil has been falling for the same reason as stocks — the fear of a deep global recession.

Stocks sold off early after the Labor Department said the number of newly laid-off individuals seeking unemployment benefits jumped last week to the highest level since right after the Sept. 11, 2001, terrorist attacks. There was also more evidence of a severe pullback in consumer spending — a worsening trend that had pummeled stocks earlier in the week. Wal-Mart Stores Inc. trimmed expectations for full-year earnings, and Intel Corp. late Wednesday cut more than $1 billion from its sales forecast.

But then the S&P lifted above its Oct. 10 trading lows, and a Treasury auction of 30-year bonds got lower than average but still decent demand from both domestic and foreign buyers, said Arthur Hogan, chief market analyst at Jefferies & Co. The auction results alleviated some fears about the government having a hard time financing its costly bailout.

Many analysts had predicted the stock market would retest the multiyear lows it reached last month. They also still forecast volatility for some time to come, as Wall Street tries to rebuild from October’s devastating losses and gauge the severity of the economy’s downturn.