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Wall Street jumps sky-high, but few are exhaling

Wall Street broker William F. Lawrence views stocks Tuesday while working on the floor of the New York Stock Exchange. The Dow Jones industrials soared almost 900 points but did little to dispel investors' fears that the market may right itself after months of ups and downs. AP Photo/David Karp

Wall Street's best day in two weeks -- and one of its best ever -- was a joyless rally.

Even a manic, final-hour stampede of buying that sent the Dow Jones industrials soaring almost 900 points did nothing to dispel the feeling that the market could turn on investors in an instant.

But the extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days. Investors are expecting a cut in interest rates when the Federal Reserve announces its decision today. But they're also staring into an economic abyss, bracing for a recession of a depth no one knows for sure.

Any other day like this -- the Dow and the Standard and Poor's 500 both rose almost 11 percent -- might have ended with boisterous cheers and paper tossed into the air. On Tuesday, 4 p.m. came with meager applause.

"I don't think it will be a sustained move," said Matt King, chief investment officer at Bell Investment Advisors.

The Dow finished 889 points higher to close at 9,065.

Analysts ventured a number of explanations for the sudden rally -- including coming interest rate cuts, bargain hunting, a market desperate to find a bottom and the expectation that banks, at the urging of the White House, will quit hoarding money and start making loans.

"There is nothing fundamental that came out today or yesterday that would take it up or down. We're all groping for something meaningful to talk about," said Bob Andres, chief investment strategist at Portfolio Management Consultants. "The market is exhausted from going down."

The mood on Main Street is decidedly more pessimistic, and new data Tuesday showed Americans are more depressed than market analysts had expected.

The Conference Board's consumer confidence index plunged to the lowest level in its 41-year history in the wake of this month's financial meltdown, the sharp drop in home prices and increasing job losses.

The index fell to 38, down from a September reading of about 61 -- the third-steepest monthly decline since the board started the measure in 1967. Analysts, way off the mark, had expected 52.

"It's the worst consumer environment since the 1981-1982 recession," said Adam York, an economist at Wachovia Corp. Americans believe "there's a very dire situation in the U.S. economy right now, and they're not far from being right," he added.

Financial market turmoil and falling housing prices have wiped out trillions of dollars of household wealth in recent months. The S&P 500 had fallen 27 percent in October, and 40 percent for the year, before Tuesday's jump.

S&P said in a report earlier this week that holiday retail sales would probably fall 2 percent to $250 billion this year, "the most difficult holiday season in memory for U.S. retailers."

Holiday sales have increased an average of 4.4 percent a year in the past decade, the report said.

Meanwhile, the housing slump, which set off the mortgage crisis that has consumed Wall Street for more than a year, shows no sign of abating. A closely watched index of home prices fell Tuesday by its steepest ever annual rate in August.