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Wall Street Rebounds Wednesday - 2002-07-24

The Dow Jones industrials surged in heavy trading Wednesday, marking its second-biggest point gain ever and crossing back over the 8,000 mark. Analysts attribute the rebound to the crackdown on corporate scandal.

Heavy trading on Wall Street continued throughout the day and by the closing bell, all major indexes had roared back from a strong sell-off earlier.

After days of devastating selling sprees, blue chips stocks closed at 8,191 points on Wednesday, a one-day gain of nearly 500 points.

The Nasdaq composite index was up nearly 5 percent after gaining 61 points, and the broader Standard and Poor's 500 index was up 45.73 points, closing at 5.7 percent. According to Nicholas Angilletta, the head of retail trading at the Investment firm Salomon Smith Barney, the rally indicates the stock market could be on the road to recovery.

"I think again this is a good sign, a good sign of stabilization," she said. "I am not going to say we are not going to trade low before we get a little bit higher, but I think we stay north of 8,000 on the Dow for this week and I think we will probably even see we might even see north of 1,300 on the composite."

The rally followed sharp rises in shares of J.P. Morgan Chase and Citicorp after rating agency Standard and Poor's reiterated its credit ratings on the two financial institutions.

The rebound came one day after a U.S. Senate hearing began probing the relationship between the financial powerhouses and the now bankrupt Enron Corporation. The two banks were accused of lending Enron billions of dollars through disguised commodity trades. J.P. Morgan Chase denied the allegations in a conference call with analysts.

Wall Street analysts also point out that U.S. stocks' move into positive territory could have been the result of the government's attempt to restore investor confidence.

Congress moved ahead with corporate fraud legislation, and the U.S. Justice Department arrested three former corporate executives at bankrupt cable TV company, Adelphia Communications Corp.

U.S. Deputy Attorney General Larry Thompson announced the arrests and the charges of security, wire and bank fraud. "Make no mistake," he said. "We are committed to bringing the collective resources and expertise of federal law enforcement, we are committed to bringing this expertise to bear against corporate fraud wherever it occurs."

Despite Wednesday's rally, market observers are skeptical of any long term rally. After the market closed, media giant AOL Time Warner said that federal regulators had opened an investigation into its accounting practices.