Stocks Open Solidly Up On Paulson Plan For Fannie, Freddie
NEW YORK (MarketWatch) - U.S. stocks on Monday opened higher after Treasury Secretary Henry Paulson offered a lifeline to mortgage-finance giants Fannie Mae and Freddie Mac, and InBev NV said it would acquire Anheuser-Busch Cos. for $52 billion.
"The news restored investor confidence and caused the dollar to rebound from its near record lows on Friday," said Wachovia Bank analyst Jill Trainor of Paulson's move.
Shares of Fannie Mae and Freddie Mac climbed sharply, with the former up 22% and the latter climbing 15.7%, on the steps by the Treasury and Federal Reserve. The early action is a marked rebound from recent, steep declines that came along with investor concern about the viability of the government-sponsored companies.
The Dow Jones Industrial Average climbed 82.32 points to 11,182.86, with all but four of its 30 components gaining.
The S&P 500 gained 9.20 points to 1,248.69, while the Nasdaq Composite climbed 12.54 points to 2,251.62.
The Fed on Sunday said it was prepared to lend to both Fannie and Freddie, and Paulson is requesting congressional approval of a plan to widen the Fed's line of credit in the two, which together back about half of all outstanding U.S. home mortgages.
Investors applauded the weekend moves in the early going, with the government's rescue of Fannie Mae and Freddie Mac bolstering the dollar.
Crude oil fell in early trade on the New York Mercantile Exchange, with futures for August deliver down 33 cents at $144.75 a barrel.
Underlining the financial sector's ongoing troubles, federal banking regulators on late Friday seized mortgage lender IndyMac Bancorp Inc. after anxious investors made a run on the bank, with the failure the third largest of a U.S. bank.
On the M&A front, Anheuser-Busch said it had accepted an improved bid from Belgium-based InBev in a deal that would create the globe's largest beer maker. .
Shares of Yahoo Inc. declined 3.4% in the wake of its weekend rejection of an offer from Microsoft Corp. and dissident investor Carl Icahn.
In overseas action, Asian stocks slid on inflation and interest-rate worries, with Tokyo's Nikkei 225 Average finishing 0.2% lower. .
In Europe, shares advanced, with the pan-European Dow Jones Stoxx 600 index recently up 1.2%. .
U.S. stocks fell on Friday, driven by worries about Fannie and Freddie along with another spike in the price of crude to above $147 a barrel.
By Kate Gibson