U.S. Stocks Gain On Buffett's Goldman Buy
NEW YORK (MarketWatch) -- U.S. stock indexes stepped modestly higher on Wednesday, with billionaire investor Warren Buffett helping lift investors' sentiment by buying a $5 billion stake in Goldman Sachs Group Inc.
"Buffett's $5 billion injection into Goldman Sachs is being seen as a vote of confidence for the firm and the financial markets," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Markets remained jittery as Congress heard a second day of testimony by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson on plans to pass a $700 billion troubled-asset buying plan.
The Dow Jones Industrial Average rose 19.27 points to 10,873.44, with 15 of its 30 components trading higher, with the early gains led by The Procter & Gamble Co. , up 1.4%, and Alcoa Inc. , ahead 1.3%.
The Dow's financial shares proved mixed, with Citigroup Inc. off 3.7%, and J.P. Morgan Chase gaining 1.2%.
The S&P 500 gained 1.47 points to 1,189.69, with financials fronting sector advances among the index's 10 industry groups, with Freddie Mac , Fannie Mae and Lehman Brothers Holdings Inc. all posting double-digit percentage gains early on.
The Nasdaq Composite climbed 8.14 points to 2,161.47.
Thirty minutes into the trading session, volume hit 129 million on the New York Stock Exchange, and decliners overshot advancers 5 to 4. On the Nasdaq 82 million shares exchanged hands, and decliners passed advancers more than 2 to 1.
Beyond buying $5 billion in preferred stock, Buffett's Bershire Hathaway Inc. also has warrants to acquire an additional $5 billion in common stock in Goldman , which also plans to raise $2.5 billion in a public offering of its stock. .
Insurer American International Group Inc. said it's going to take the $85 billion, two-year facility from the Fed after failing to find private-sector financing.
Bernanke and Paulson return to Capitol Hill on Wednesday, continuing testimony on the government's rescue plan for the financial services sector.
In a related development, the FBI is investigating four big U.S. financial institutions whose collapses helped trigger the government's proposed bailout, according to media reports late Tuesday. .
Ahead of fresh data on U.S. petroleum supplies, oil futures gained more than 2%, with crude for November delivery recently up $1.87 to $108.45 a barrel in electronic trading on Globex.
Gold futures also gained in early electronic trading, with the contract for December delivery up $10.4, or 1.2%, to $901.6 an ounce.
Overseas, the Nikkei 225 edged up 0.2% in Tokyo while the FTSE 100 edged lower in London.
By Kate Gibson