Wall St.'s rescue rallies are short-lived

By Ellis Mnyandu - Analysis

NEW YORK (Reuters) - Every time over the last year that the U.S. government has stepped in to calm jittery markets Wall Street has scored big gains -- but time and again the move higher has proven fleeting as the credit crunch has flared anew.

The market surged again on Monday, on the heels of the government's takeover of home finance companies Fannie Mae and Freddie Mac, as it has after every rescue or bailout since July 2007,

As with the demise of investment bank Bear Stearns in March, the U.S. Treasury unveiled its rescue plan of the beleaguered home finance companies on a Sunday.

The move, according to analysts, suggested that Washington sought to instill confidence in the markets just as the week got under way.

But the big surge in stocks on Monday could be fleeting. Already on Monday, there were fears that the government's interventions may be postponing what is likely ultimately to be further downside as news on the economy turns grimmer.

"If you look at the S&P 500 chart, every time it looked like we were going to test new lows, there was always something that stopped the downtrend. This is just prolonging the agony." said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

Saluzzi said the propensity for U.S. stocks to surge and then flag as the optimism stemming from every trickle of news about a government rescue bid fades showed just how uncertain investors have become about the market's prospects.

A chart of the S&P 500 over the last year shows the peaks and the troughs that the broader U.S. stock market has endured since the credit crisis went on overdrive. But also apparent is the brevity of each upsurge associated with a government bid to ease the market's strains.