Wall Street Down After Yesterday's Big Gains

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WASHINGTON - Despite a key interest rate cut by the Fed, Wall Street failed to continue the big gains investors had hoped for, Wednesday.

The Dow went up nearly 280 points during the last quarter of trading, but plunged during the final hour, ending down 80 points.

Most Asian markets went up Wednesday following a 900 point rally on Wall Street the day before.

But after a day of gains and then a sudden turn for the worst, some are seeingTuesday's stunning rebound of the stock market as just a blip.

Why the Dow Rallied

There were good reasons for the Dow to suddenly shoot up nearly 900 points, Tuesday. For one thing, markets can only go down for so long.

"To a certain extent you can't sell forever. We've had an indiscriminate sale on stocks. When that happens at some point in time you get a reflex rally," said Art Hogan, Chief Investment Officer of Jefferies &Co.

But others warn that big rallies often happen in bear markets - and this one may not last.

Meridian Fund's Jonathan Corpina said, "This could unravel just as fast as it went up."

"I think, overall, people are just waiting to see when is this going to end and when is it safe to get back in the market," said Doreen Mogavero, president and CEO of Mogavero.

Some analysts hope that the Federal Reserve's rate cut today will help stimulate the economy as lower interest rates ripple out from banks to businesses and consumers.

And the Treasury has started passing out billions of that federal money to banks, and that could start to thaw the credit freeze that's locked up the economy.

"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House spokesperson Dana Perino said. 

Consumer Confidence at Record Low

Many folks are just ignoring these up days in the market and battening down their hatches for tough times.

That's reflected in the latest consumer confidence numbers - the lowest in 41 years.

"I don't know how long this is going to last, so you got to save money," said one consumer.

Another said, "I'm not going out and having dinners and doing that kind of thing. I'm starting to bring a lunch to work - which is something new."

A higher stock market could strengthen consumer confidence, though. Tuesday was the Dow's second best single day rally ever in terms of points. The very best day was just a couple of weeks ago.

Many Remain Guarded

Market analysts are still cautious.

Some believe we could see a short-term rally here that could carry the Dow above 10,000. But others are still concerned about the long-term. They believe stocks could eventually go much lower in the years ahead.

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CBN News
Paul Strand

Paul Strand

CBN News Washington Sr. Correspondent

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