NEW YORK — Investors did an abrupt turnaround on Wall Street Thursday, muscling the Dow Jones industrial average up more than 550 points after driving it down near its lows for the year on a stream of negative economic and corporate news.
After three days of selling that wiped out about $1 trillion in shareholder value, many investors, though nervous about a prolonged economic downturn, appeared convinced the market had priced in enough bad news. So when the Standard & Poor's 500 index, the indicator most watched by traders, managed to recover from multiyear trading lows, buyers swarmed back in.
It's "a herd mentality," said Ryan Larson, senior equity trader at Voyageur Asset Management. "We started going higher, and you don't want to be the last one on the boat."
The market was following in dramatic fashion its pattern of huge price reversals, one that was set early in the now 15-month-old credit crisis and that has become almost the norm on Wall Street.
Some analysts said investors were positioning themselves ahead of a meeting of Group of 20 leaders in Washington. The meeting could bring decisions on mending the troubled global financial system.
There was "some anticipation that we'll hear some good news from that meeting," said Jack A. Ablin, chief investment officer at Harris Private Bank. Thursday's rally was "part hopeful, part technical. But certainly welcome."
As stocks rallied, so did oil prices, sending shares of energy companies higher. Big gains in Chevron Corp. and Exxon Mobil Corp. represented one-fifth of the Dow's point increase Thursday.
Stocks sold off early after the Labor Department said the number of newly laid-off individuals seeking unemployment benefits jumped last week to the highest level since right after the Sept. 11, 2001, terrorist attacks. There was also more evidence of a severe pullback in consumer spending, a worsening trend that had pummeled stocks earlier in the week.
But then the S&P lifted above its Oct. 10 trading lows, and a Treasury auction of 30-year bonds got lower than average but still decent demand from both domestic and foreign buyers, said Arthur Hogan, chief market analyst at Jefferies & Co. The auction results alleviated some fears about the government having a hard time financing its costly bailout.
Many analysts had predicted the stock market would retest the multiyear lows it reached last month. They also still forecast volatility for some time to come, as Wall Street tries to rebuild from October's devastating losses and gauge the severity of the economy's downturn. During past recoveries from bear markets, a great deal of turbulence in the market became commonplace, so it's possible that Thursday's gains will get erased if more gloomy reports pour in.
But Hogan called the market's resiliency a "great sign."
The Dow rose 552.59, or 6.67 percent, to 8,835.25, after falling as low as 7,965.42 and rising as high as 8,876.59. That's a trading range of 911 points. The nearly 553-point gain was the third-largest single-session point gain on record.
The Standard & Poor's 500 index rose 58.99, or 6.92 percent, to 911.29. The Nasdaq composite index rose 97.49, or 6.50 percent, to 1,596.70. The Russell 2000 index of smaller companies rose 38.43, or 8.5 percent, to 491.23.
The stock market gained back $700 billion Thursday, after losing about $1 trillion during the first three days of the week, according to the Dow Jones Wilshire 5000 index, which reflects the value of nearly all U.S. stocks.
At its lowest trading level Thursday, the market value of the Wilshire index fell below $10 trillion for the first time since April 2003.