U.S. Stock Indexes Rally On Optimism For Bailout
NEW YORK (MarketWatch) -- U.S. stocks surged Thursday afternoon after Senate banking chief Christopher Dodd said there is a fundamental agreement on a rescue package for the embattled financial sector, helping overtake grim economic data, including a slump in new-home sales.
"The pace of negotiations has quickened to a deal framework by tonight from original estimates that stretched into the weekend or even next week," analysts at Action Economics said of efforts on Capitol Hill to agree on a rescue plan. .
After rising 300 points, the Dow Jones Industrial Average was last up 220.23 points to 11,045.4, with 25 of its 30 components striking gains. The blue-chip advance was fronted by J.P. Morgan Chase , ahead 8.4%.
Dow gainers also included General Electric , up 4.4%, after the company cut its earnings view for the year and halted a stock buyback, citing its financials business and the need to maintain a AAA credit rating. .
General Motors Corp. was the Dow's biggest laggard in late-afternoon trade, with shares of the automaker down 2.9%.
The S&P 500 rose 35.94 points to 1,291.62.
Telecommunication services and financials led broad-based gains across all of the S&P's 10 industry groups, with telecommunication services up 4.2% and financials gaining 2.8%.
Financial shares on the rise included Lehman Brothers Holdings Inc. , up 40%; Freddie Mac , up 3.2%; and Fannie Mae , up 3.5%.
Erasing prior gains, American International Group Inc. declined 2.4%. Maurice "Hank" Greenberg, AIG's former chief executive, plans to sell sales of the giant insurer for "liquidity and other purposes," according to a filing with the Securities and Exchange Commission. .
The Nasdaq Composite climbed 34.66 points to 2,190.34, with Micron Technology Inc. among the standouts, its shares rising 6.9%.
Volume on the New York Stock Exchange approached 783 million, with nearly three stocks on the rise for each one on the decline. On the Nasdaq, 506 million shares exchanged hands, and advancers topped decliners about 8 to 5.
Active issues
Late Wednesday, Nike reported a 10% decline in quarterly profit, beating estimates.
Shares of Washington Mutual Inc. reversed course on earlier gains, lately down 19.9%, in the wake of a Wall Street Journal report saying the bank has approached several private-equity firms about a takeover.
The ongoing debate over the proposed bank rescue plan had stocks virtually stalled Wednesday, with the Dow closing lower for a third straight day in its longest losing streak since early August.
"We saw the market sell off late in the day when [GOP presidential nominee John] McCain announced he was suspending his campaign and running back to Washington to help. Wall Street saw this as something that might delay reaching a consensus, essentially too many cooks in the kitchen," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Putting his weight behind the bailout effort, President Bush made an appeal for support in a nationally televised address Wednesday night, warning inaction could result in a "long and painful recession." .
Early economic data Thursday served to underscore U.S. economic weakness, with orders for U.S.-made durable goods falling 4.5% in August. .
Also making news, August's sales of new homes dropped 11.5%. .
And first-time jobless claims rose to their highest count in seven years last week, the Labor Department reported.
Crude moves
With equities on the rise, Treasury prices were mostly lower, with 10-year note yields gaining 4 basis points to 3.847%. .
Crude futures traded in a choppy pattern, with oil for November delivery lately rising back above $107 a barrel. .
Gold futures fell, with the contract for December delivery skidding $13 to finish at $882 an ounce on the New York Mercantile Exchange. .
There was a big rally in China overight, with the Shanghai Composite up 3.6%. Other markets didn't fare as well, as the Nikkei 225 ended 0.9% lower in Tokyo. The FTSE 100 moved higher in London, in line with a broad European advance.
By Kate Gibson