Wall Street Undergoes Big Mood Change
Saturday April 5, 6:13 am ET 
By Joe Bel Bruno, AP Business Writer  
Clear Shift in Sentiment Helps Wall Street Get Past Dour Economic 
News, but Will It Hold? 


NEW YORK (AP) -- With the start of a new quarter, Wall Street seems 
to have found something it badly needed: a major shift in sentiment.
Stocks punished during months of sharp losses were scooped up this 
past week as big investors like hedge funds returned to the market. 
And there's a sense that individual investors -- who yanked their 
money from the stock market out of fear -- might be on the verge of a 
comeback as well.
 
Certainly, worries about the economy and further calamities striking 
the world's investment banks haven't evaporated. What has changed is 
the way investors are looking at the market -- simply, that stocks 
are more likely to go up than continue their precipitous declines -- 
and that allowed the stocks to hold on to most of their gains this 
past week. After the Dow Jones industrials rose 391 points on Tuesday 
alone, the stock market's best-known indicator ended the week up 393 
points.

"Sentiment is the whole story, and what we're seeing is an 
improvement in sentiment," said Alfred Goldman, chief market 
strategist at Wachovia Securities. "I believe the market has 
bottomed, and eventually all the problems are baked into stocks and 
we can start looking beyond the valley to the peaks ahead."

He believes the best example of this was seen in the just the past 
five trading days. Tuesday's big rally came on the first day of the 
second quarter. Then came three days of disappointing economic 
readings that stoked more fears of a recession, including a surge in 
jobless benefits claims and Friday's news that employers slashed 
80,000 positions in March.

The data are clear signs that the economy is shrinking, and may well 
be in a recession. But, unlike previous weeks when the news would 
have sent the major stock averages skidding, investors barely 
flinched.

"The selling has been overdone," Goldman said.

Billionaire investor Warren Buffett might have had it right when he 
told shareholders a few years ago: "If they insist on trying to time 
their participation in equities, they should try to be fearful when 
others are greedy and greedy only when others are fearful."

Another sign of the shift in sentiment: the Chicago Board Option 
Exchange's volatility index, often referred to as the "fear index," 
which fell to 23 on Friday. The lower the index, the less anxiety 
there is on the Street, and Friday made it four straight days in 
which the reading was below 24, a feat not seen since the end of 
February.

The index reached its highest point in a year on March 17, when it 
crossed 35. That was the day after news that JPMorgan Chase & Co. was 
buying Bear Stearns Cos. to save the investment bank from collapse.

What has brought the index down, and helped lift the market's 
spirits, is a growing sense that the Federal Reserve is managing the 
credit crisis, using more than just interest rate cuts. Investment 
banks are using a new program to borrow money from the central bank 
to boost liquidity, and Fed Chairman Ben Bernanke said he doesn't 
expect a repeat of what happened to Bear Stearns.

Analysts believe the performance of financial companies -- widely 
believed to be the group that leads markets higher -- will be a key 
to whether investors can hold on to their optimism. Their billions of 
dollars in write-downs from failed mortgages fed Wall Street's 
decline.

"I think the market is still very fragile, especially because people 
feel there are hidden depth charges on the books of financials," said 
Stephen Massocca, co-Chief Executive of Pacific Growth Equities, a 
San Francisco-based investment bank. "Right now, people are relieved 
that the crisis appears to be over, and at the minimum, we stopped 
draining."

He and others might get an answer once some of the nation's biggest 
financial companies begin to report earnings later this month -- and, 
more important, provide outlooks for the rest of the year. That 
starts April 16, when JPMorgan reports first-quarter results, 
followed by Merrill Lynch & Co. the following day and Citigroup Inc. 
the next.

"Further collapse of the market could depend on them," Massocca said.




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