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Aug 9, 2011 - Full Episode | Nightly Business Report | PBS

Nightly Business Report for August 9, 2011 - Full EpisodeRead the full text transcript here: http://www.pbs.org/nbr/site/onair/transcripts/nbr_transcripts_110809/Wall Street Rebounds on Fed DecisionSUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: A gloomy economic outlook from the Federal Reserve today, but here on Wall Street, a rip-roaring stock market rally with the Dow surging more than 400 points. The Fed voted to keep its key interest rate near zero until the year 2013. Now it's a highly unusual move, Tom, it means the Fed thinks the U.S. economy is still in bad shape and will stay that way for two more years. TOM HUDSON, NIGHTLY BUSINESS REPORT ANCHOR: Yes, unprecedented, Susie, and the major averages though fell right after the Fed's announcement, but staged a big rally in the last 90 minutes of trading. It was a 640-point swing for the Dow Jones Industrial Average. And here is what the day looked like for the Dow. It opened up pretty strong with triple-digit gains; able to hold those throughout the day, but then sold off right into the Federal Reserve announcement. And the Dow was down almost 200 points a half hour after the Fed statement, but came back strong into the close to end with a better than 4 -- almost a 4 percent gain. The Dow here ended at 430 points to the high side, the NASDAQ jumped 125 points at the end of the day, the S&P climbed 53. And this came on big volume, heavy, but a little bit less than yesterday's sell-off, 2.4 billion on the Big Board, 3.8 billion trading on the NASDAQ. GHARIB: Now let's take a look at what exactly the Fed said about the economy. Economic growth has been "slower than expected," it said; job market indicators have been weaker than anticipated; the unemployment rate will "decline only gradually." Housing, "depressed"; consumer spending has "flattened"; and "downside risks to the economic outlook have increased."HUDSON: So why did investors go on that late-day buying spree today? Suzanne Pratt went to Wall Street to find out. SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today was a day for some serious bargain-shopping on Wall Street. After the recent pounding and panic in U.S. stocks, investors finally saw value. And they found it almost everywhere. But the Federal Reserve also threw a curve ball at the stock market today, and veteran trader Art Cashin says that sent investors on a wild ride. CASHIN: The market went through whip-saw gyrations like I've hardly seen in the 50 years I've been here. It couldn't make up its mind. PRATT: Even with today's buying, fear remains the dominant sentiment among investors. Equity strategist Scott Wren says that's because it's going to take time for the market to digest what the Fed is now saying about the economy. SCOTT WREN, WELLS FARGO ADVISORS: The market was hopeful that, coming in to this FOMC meeting, that the Fed would do something with the language, and possibly even take some sort of defined steps to basically inject more liquidity into the system or something. PRATT: Before the last month of trading, the Dow had only experienced moderate volatility in 2011. But experts say the trading environment is changing, and investors should get used to more crazy days like today. WREN: Typically, when you enter into the middle part of the cycle and there are questions over earnings growth and the sustainability of the recovery, you tend to have a lot of volatile trading days and really muted- to-flat returns for a period. PRATT: Experts say this market is all about uncertainty: business uncertainty, consumer uncertainty, and investor uncertainty. And those are conditions that cannot disappear overnight. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York. A late day rally in stocks, with the Dow surging more than 400 points. The Fed voted to keep its key interest rate near zero until 2013.
Length: 22:56

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