Transcripts

Wall Street's Rally Is No April Fool's Joke

SUSIE GHARIB: Wall Street kicked off the new quarter with an impressive rally and the best second quarter start since 1938. The Dow jumped 391 points and the NASDAQ rose 83. Leading today's big rally, UBS and Lehman Brothers. Lehman stock surged almost 18 percent after the firm raised more than $4 billion and shares of UBS leapt nearly 15 percent, even after the Swiss bank said it would write down another $19 billion in mortgage-related losses. Suzanne Pratt looks at whether today's rally signals a real turnaround for the market or just an April fool's joke.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: On a day when investment bank UBS announces a massive write down, it would stand to reason that the stock market might sell off, and sell off sharply. That's exactly the opposite of what happened today. Not only did the Dow slap on nearly 400 points, but financials led the charge. Analysts say investors were big equity buyers because they see a light at the end of the sub-prime tunnel. Veteran strategist Joe McAlinden says today's market activity suggests the light may be a bright one.

JOSEPH MCALINDEN, CHIEF INVESTMENT OFFICER, CATALPA CAPITAL: I think that this is a signal that the worst is over. And, you know, I think it could make sense to be putting money back into the market and in particular I think in the areas where you are seeing emerging leadership.

PRATT: Others, however, are less confident that the days of massive write downs from mortgages and related assets will soon be over. Some investment pros believe home prices need to bottom before balance sheets at financial firms can truly recover and stock prices as well. Edward Jones analyst Tom Kersting says it's hard to say when the turmoil for financials will end.

TOM KERSTING, FINANCIAL SERVICES ANALYST, EDWARD JONES: We do expect more bad news and more write downs with the upcoming first quarter earnings results. However, having said that, we do see a lot of value and we believe a lot of this bad news is priced into the financial services stocks right now.

PRATT: Still others believe write downs, big or small, at financial firms will take on less significance for equity investors in the coming months. Many pros say instead they expect the economy to take center stage on Wall Street. Raymond James strategist Jeffrey Saut echoes that belief and says what really matters is that we're still in a bear market that began last July.

JEFFERY SAUT, CHIEF INVESTMENT STRATEGIST, RAYMOND JAMES: Bear markets tend to last 15 to 18 months, so, you know, I am not of the belief that we are in a new secular bull market. But I am of the belief that the news is so negative here, sentiment is so negative here, that we could get a pretty decent tradable rally off of these lows.

PRATT: Several big banks will release first quarter results in a few weeks. More write downs are expected. Experts say just how the market responds to those write downs will tell us a lot about whether today's rally is for real. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.