The crisis: A timeline

The Dow Jones industrial average manages to rally more than 400 points, despite a drastic slowdown in U.S. manufacturing activity and huge losses at Citigroup and Merrill Lynch.

Wall Street rallied on Thursday Oct. 16, overcoming dour reports about U.S. manufacturing and steep third-quarter losses at Citigroup and Merrill Lynch, with the Dow ending up more than 400 points.

The Dow Jones industrial average ended the day up 401 points, after having fallen as much as 380 points just after the market opened. Oil prices also fell below $70 a barrel.

In the morning hours, the Federal Reserve reported that production at U.S. factories fell by the largest amount in nearly 34 years.

The Philadelphia Fed also said in a separate report that manufacturing in the region had fallen to an 18-year low.

Finance giants Citigroup and Merrill Lynch also reported billions in third-quarter losses due to steep credit and mortgage-related writedowns.

Price inflation, however, remained relatively flat in the month of September, with the Consumer Price Index showing only modest inflationary pressure.

The number of new unemployment claims for the week also fell by more than analysts had expected, but the number of newly unemployed workers remained unusually high.

The government's efforts to restore bank confidence and encourage interbank lending continued to pay off as the overnight Libor rate, a measure of the price banks charge each other to borrow money, fell to 1.94%, the lowest level since Nov. 9, 2004.

Just a week prior, the overnight Libor was at 5.09%, and had even reached as high as 6.88% after the U.S. government passed the $700 billion bailout bill on Oct. 3.

Business lending however remained stagnant as the amount of commercial paper, short-term loans that businesses use to finance daily operations, fell by 2.6% over the previous week, according to the Fed.

The amount of outstanding commercial paper had been steadily declining ever since the Lehman Brothers bankruptcy on Sept. 15.