NEW YORK — Wall Street received the interest-rate cut it wanted but still turned in a baffling late-day performance Wednesday, shooting higher and then skidding lower in the last minutes of trading as some investors rushed to cash in profits after the previous session’s big advance.
Major indexes ended the day mixed, with the Dow Jones industrials falling 74 points — only the third time in October that the blue chips had just a double-digit change at the close.
Analysts were divided over why the market turned around so abruptly. Some cited reports of a lackluster profit forecast at General Electric — a Dow component that dropped nearly 4 percent from its late- session high — and others contended investors were simply looking to cash in gains after the Federal Reserve’s decision to lower its fed funds rate by a half-point to 1 percent.
“It was a panic sell in the last two minutes,” said Dave Ro velli, managing director of U.S. equity trading at Canaccord Adams in New York, referring to reports that GE was expecting 2009 profits to be little changed from 2008.
The reports were subsequently called into question, and a GE spokesman said the statements were taken out of context.
Because of the last-hour confusion, it was likely that it would take the opening of trading today to get a better read on how the market feels about the Fed’s rate cut and its accompanying economic statement.
At the same time, the Commerce Department’s expected reading on the gross domestic product for the third quarter will likely shape trading.
The market waffled while it was still digesting the Fed’s afternoon announcement, then advanced for most of the final hour of trading. Until shortly before the close, it looked like Wall Street was feeling more confident about the economy and would extend its huge rally from Tuesday, which propelled the Dow Jones industrials up nearly 900 points.
Policymakers spelled out a weakening of economic conditions in the U.S. and abroad, citing first a drop in spending by American consumers. The Fed also reiterated that it expects government steps, including its own efforts to increase liquidity, to improve credit-market conditions and the economy over time.
“We set ourselves up in the last hour with a golden opportunity to lock in profits,” said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher.
He said that very late in the day, more investors were putting a somewhat downbeat spin on the Fed’s statement, which Larson said indicated policymakers are willing to lower the fed funds rate below 1 percent if necessary. Traders started thinking, “if they’re willing to go under 1 percent, there must be serious problems that we don’t know about yet,” he said.
Japan’s Nikkei 225 Stock Average today was on its sharpest three-day rally in at least 38 years, as a gain in commodity prices and a weaker yen boosted the earnings prospects for resource companies and automakers. The Nikkei 225 climbed 495.51, or 6 percent, set for a three-day gain of 21 percent, the most since at least 1970, the limit of Bloomberg pricing data.
The broader Topix index rose 4.7 percent.
Volatile season
Wednesday’s two-digit loss for the Dow Jones industrials was a relatively calm day amid triple-digit ups and downs:
936 — Largest-ever point gain for the Dow Jones industrial average, achieved Oct. 13
778 — The Dow’s worst-ever point loss, reached about two weeks before, Sept. 29
