Does this mean that the economic crisis that has been predicted is over? Or that it was never really a crisis at all? That is what we have to ask as the Dow soars to a new high.

Stock markets rallied into record territory today as investors bought back into the banking and housing sectors, a sign that Wall Street could see an end to the summerÂ’s subprime housing woes and a lower risk of recession.

The Dow Jones industrial average opened the fourth quarter by soaring more than 200 points at one point, putting the index well above its previous high set in July. At the close, the Dow was up 191.92 points, or 1.4 percent, at 14,087.55. The Standard and PoorÂ’s 500-stock index rose 1.3 percent to 1,547.04, trading just beneath record levels, and the Nasdaq rose 1.5 percent, to 2,740.99.

The advances came as Citigroup and UBS, two of the worldÂ’s largest banks, predicted steep declines in third-quarter earnings and announced billions of dollars in losses and write-downs related to subprime mortgage-backed securities and loans.

“When I got in this morning I would have bet quite a bit of money that we would be going the other way today,” said Joseph Brusuelas, the chief United States economist at IdeaGlobal.

But the profit warnings eased some investorsÂ’ anxiety about the long-term effects of the subprime collapse, analysts said, leaving Wall Street with a sense that the worst of the fallout from the summerÂ’s credit crisis had passed.

“The market believes that the crisis is over,” said William Rhodes, the chief investment strategist of Rhodes Analytics, a market research firm. “Whatever problems emerged last quarter are last quarter’s problems. They’re over, that’s it, they’re done. So let’s move onto the next thing.”

So rather than a meltdown, it appears we were really dealing with a readjustment. If this continues, the subprime mortgage "crisis" will have run its course in a matter of weeks, not the months and years that some analysts predicted.

Posted by: Greg at 09:37 PM | No Comments | Add Comment
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