The Week on Wall Street: Rally To Rout
Stocks traded lower on Friday but rebounded from session lows after the Federal Reserve added more money to the banking system for a third time in the session to stem a growing credit crunch.
The Fed injected $38 billion of temporary reserves into the banking system. It was the second day the Fed, along with central banks around the world, added liquidity to meet the demand for cash among banks.
"There is a general sense the Fed will do whatever is necessary to avoid a credit crisis," said Charles Rotblut, senior market analyst at Zacks.com. "There definitely is a positive reaction right now, people are relieved they are not being hawkish to inflation. This said, I don't think we're out of the woods yet, investors watching the market will need to keep a bottle of Dramamine close by."
Abby Joseph Cohen, Goldman Sachs' chief U.S. portfolio strategist, told CNBC that the U.S. economy remains strong and maintained a year-end target of 1600 on the S&P 500.
"The fundamentals have gone out the window for awhile and in some cases it means that better value has been created," said Cohen. "We think (the S&P 500) is about 10% underpriced and that typically has been a good entry point."
Peter Kang is a markets writer at CNBC.com and can be reached at firstname.lastname@example.org.