Wall Street: Wednesday close

Graeme Beaton12 April 2012

AMERICA'S 'don't worry, be happy' investors sent shares soaring for a second day. The Dow Jones Industrial Average swung within a 450-point range before finishing the day up 182.06 points or 2.2% to 8456.15. The Nasdaq closed out a similarly volatile session ahead 21.35 points or 1.7% to 1280.90.

Analysts said the mood swings seemed to hinge on whether investors believed that Federal Reserve Chairman Alan Greenspan and his colleagues would cut interest rates when they meet next week.

Sentiment swung between negative and positive poles until late in the day when investors seemed to accept the argument that the risk of disappointing the markets was too great for the Fed to ignore. Still, not all market-watchers were so confident, given that the justification for a Fed cut is a weakening economy which could crimp company profits further.

'The markets have factored in an immediate rate cut and they may well sell off if the Fed doesn't cut rates next week,' said one trader. 'It's become a matter of expectations.'

Robert Dickey, technical analyst at investment firm RBC Dain Rauscher, said investors had reason to be cautious. 'The rallies of the past few months have all been met with an avalanche of selling, and it is unlikely that investors will believe the current strength unless it lasts for a long, long time,' he said.

The rally was attributed to speculation that the Fed would cut rates perhaps as early as next Tuesday. Lehman Brothers put out a paper calling for the Fed to cut rates from the current 1.75% to 1% by year's end - levels not seen since the Great Depression - in an effort to shore up the economy.

The early jump appeared tied to a stronger-than-expected quarterly report after Tuesday's close from network switch maker Cisco Systems. Cisco shares leapt 92 cents or 7.6% to $12.99.

The tech sector was generally higher on the Cisco news, with Microsoft up $1.42 or 3% to $47.09 and Intel ahead 59 cents or 3.4% to $17.72.

Newmont Mining, the world's biggest gold miner, reported higher-than-expected quarterly numbers. Newmont shares rose 65 cents or 2.6% to $25.60. AOL Time Warner, which has seen its share of selling of late, rebounded 90 cents or 9% to $10.80.

But Aon, the big insurance company, cut its outlook and announced an inquiry into its accounting and its shares tumbled $6.43 or 30% to $14.77 and TMP, which operates the Monster.com online job site, slid $4.15 or 32% to $8.63 after it said big companies appeared hesitant to hire.

Merrill Lynch rose 39 cents or 1.7% to $32.84 and Citigroup was higher by $1.12 or 3.7% to $31.52 despite negative comments on the pair from Morgan Stanley. JP Morgan added 39 cents or 1.7% to $24.04.

Among Dow components, General Electric firmed $1.10 or 3.7% to $30.75, Philip Morris retreated 41 cents or 1% to $47.85 and local telephone company SBC slumped 37 cents or 1.4% to $25.72.

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