$19 bln write-down? No problem, stock investors say

By Jennifer Ablan - Analysis

NEW YORK (Reuters) - Investors have grown so inured to calamitous reports about global credit markets that they have taken to spinning fresh bouts of bad news into fits of irrational exuberance.

Tuesday's rally in U.S. and European stocks could serve as a veritable case study in this nascent reversal of investor psychology. After all, the day's two big catalysts for the 391-point gain in the Dow Jones industrial average .DJI -- a $4 billion stock offering from Lehman Brothers and a $19 billion bad debt write-down by UBS -- would have sparked panic almost any other day.

Instead investors chose to see it as one bedraggled U.S. investment bank get a much needed market endorsement and a Swiss bank scrubbing its balance sheet clean.

"An important personality change has occurred in the stock market in that bad news is no longer killing the stock market," said Al Goldman, chief market strategist at Wachovia Securities, in St. Louis.

It was only two weeks ago that analysts and investors marked the beginning of the bottoming process with the stunning collapse of Bear Stearns BSC.N.

But to conclude that Tuesday's monstrous rally with the Dow's leap of 391 points is the resumption of a bull market is, well, a bit premature.

Strains still exist in the U.S. credit and banking markets.

"We are still in a banking crisis," said Chris Orndorff, who helps oversee $50 billion in assets as managing principal at Payden & Rygel Investment Management in Los Angeles.