Wall Street fights fear of possible recession

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Wall Street pulled off a stunning comeback Wednesday, surging higher in late trading and wiping out what looked to be yet another massive decline. The Dow Jones industrial average, down more than 323 points in earlier trading, ended the day with an advance of just under 300 points.

Such volatility has become a hallmark of Wall Street’s performance in recent months amid the ongoing housing and credit crisis and growing fears of recession.

In Michigan, where recession has been a factor for years, some believe a volatile stock market could have significant impact.

Bryan Ritchie, an associate professor of political economics for James Madison College, said the unstable stock market will impact some people’s economic confidence.

“The only people it may affect directly are people who are near retirement,” Ritchie said.

There also have been whispers of a recession, something Ritchie said is hard to tell is happening.

“Michigan has already been feeling the effects of a recession for the last six years. I don’t know if you’re going to feel a lot more than we already feel now,” Ritchie said.

As long as there is economic uncertainty, the economy will be volatile, he said.

“It’s one more piece of bad news,” Ritchie said. “It has the capacity to negatively affect Michigan.”

The Federal Reserve Board’s decision Tuesday to lower its benchmark federal funds rate by 0.75 percentage point to 3.5 percent did give intrepid investors a reason to buy Wednesday.

Rate cuts are designed to stimulate borrowing and, in turn, business activity and the overall economy.

Raoul Minetti, an assistant professor of economics at MSU, said the unstable market comes from the housing slump.

“It’s not clear how big the problem is right now,” he said.

Minetti said the stock market does not have an immediate effect on the economy.

“These types of problems have happened before in the U.S. and the market has rebounded,” he said.

Staff writer Joseph Terry contributed to this report. The Associated Press contributed to this report.

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