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2008-10-30

Wall Street - Shooting higher and then skidding lower in the very last minutes

Wall Street received the interest rate cut it wanted, but still turned in a baffling late-day performance yesterday, shooting higher and then skidding lower in the very last minutes of trading as some investors rushed to cash in profits after the previous session's big advance. The 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 close.

Analysts were divided over why the market turned around so abruptly. Some cited reports of a lacklustre profit forecast at General Electric Co — a Dow component that dropped nearly 4 per cent 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 per cent.

"It was a panic sell in the last two minutes," said Dave Rovelli, managing director of US equity trading at Canaccord Adams in New York, referring to reports that GE was aiming at 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 most likely shape trading.

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