After a tumultuous and brutal August, the stock market has regained its footing and is within striking distance of the record high it set in July.
The surge began building before the Federal Reserve cut interest rates last week and has come at a time when news from the housing market remains bleak.
Conditions in the debt markets have eased somewhat, but specialists say they remain much tighter than they were earlier this year.
Since Aug. 15, when the stock market hit its lowest point in five months, the Standard & Poor's 500-stock index is up 8.5 percent and the Dow Jones industrial average 8 percent. The increases have erased much of the decline from late July and early August and left the indexes up modestly for the third quarter, which ended yesterday.
"It's kind of amazing how well equities have held up," said Douglas M. Peta, chief market strategist at J.W. Seligman & Co., a New York investment firm. "If you went away sometime in July and came back about now, you might say, 'Nothing happened while I was gone.' "
In yesterday's trading, the Dow slipped 17.31 to 13,895.63. Broader indexes also lost ground. The Standard & Poor's 500 index fell 4.63 to 1,526.75 and the Nasdaq composite declined 8.09 to 2,701.50
The Russell 200 index of smaller companies fell 8.56, to 805.45, while the Sun-Bloomberg index of the top stocks in Maryland lost 0.38 to 352.99.
Constellation Energy Group Inc. fell $1.65 to $85.79 and McCormick & Co Inc. declined $1.28 to $35.97.
Yesterday's results still left the Dow and the Nasdaq with gains of more than 11 percent this year, and the S&P; up 7.7 percent for the year.
The market appears to be buoyed by a belief that the problems in the housing and credit markets will not pull the broader economy into a recession and that growth in Asia and Europe will help offset those ill effects. The optimism is most vividly manifest in the performance of foreign markets, particularly in the fast-developing countries such as China and India.
Even in the United States, the market's return has been led by sectors such as energy, industrials, materials and technology, which investors believe are best positioned to take advantage of the growth abroad.
The financial and consumer discretionary sectors have lagged behind; they are seen as having the most to lose from a declining housing market and slowing domestic consumer spending.
In the credit market, the Federal Reserve's recent rate cutting and its lending at the discount rate and through open market operations have eased the logjam somewhat.
Banks raising money this week for the private equity buyout of First Data Corp., a credit-card processor, were able to sell more debt than they had planned.
Still, some of the roughly $300 billion debt backlog that needs to be sold may never be worked off.
The private equity acquisitions that are falling apart or being withdrawn include the purchases of the student loan provider Sallie Mae and Harman International Industries, a maker of high-end audio speakers.
The Associated Press and Bloomberg News contributed to this article.
Stock of interest
Shares rose 43 cents to $10.18 after The Financial Times reported that the telecommunications company's chief executive, Patricia Russo, has been under pressure to quickly present a restructuring plan.