U.S. Stocks Higher As Central Bank Moves Take Hold
NEW YORK (MarketWatch) - U.S. stocks gained Monday after Goldman Sachs Group Inc. reinforced one troubled hedge fund with additional capital and central banks funneled more cash into global financial systems, easing worries about a worldwide credit squeeze.
"The most important thing was the Goldman Sachs announcement this morning that they were able to get additional investors into what appeared to be a troubled fund," Jim Awad, chairman of Awad Asset Management, told MarketWatch.
The Dow Jones Industrial Average climbed 86 points at 13,325, with 22 of its 30 components advancing, led by Alcoa Inc. , which advanced 3.6%.
The S&P 500 rose 9 points to 1,463.
The Nasdaq Composite was up nearly 14 points at 2,558.
At the New York Stock Exchange, 750 million shares were traded, while 965 million were exchanged on the Nasdaq.
Advancing issues outpaced decliners 2 to 1 on the NYSE, and by nearly 4 to 3 on the Nasdaq.
Overseas central banks continued to add liquidity into the market, with the European Central Bank on Monday saying it had provided around 47.5 billion euros ($65 billion) in loans, while the Bank of Japan added more than $5 billion.
The New York Federal Reserve injected just $2 billion in liquidity into the market on Monday, well below the $52 billion requested by banks and other institutions, according to a posting on the New York Fed's website.
The $2 billion came in the form of overnight repurchase agreements and purchases of Treasurys and agency debt. By contrast, on Friday central banks in the U.S., eurozone and Asia injected billions of dollars, including $84 billion from the European Central Bank.
"The injection of liquidity by major central banks is helping confidence that we'll be able to work our way through this credit crunch," said Art Hogan, market strategist at Jefferies & Co.
The Also helping to ease concerns, Goldman Sachs Group Inc. acknowledged steep losses at its Global Equity Opportunities fund but said the firm and others are making a $3 billion investment in the fund.
In a conference call ahead of the opening bell, Goldman CFO David Viniar said Global Alpha has lost 27% of its value year-to-date, with half of those losses coming last week. Goldman Sachs stock was up nearly 2%.
Better-than-expected retail sales also supported Wall Street's move higher, with investors drawing hope that consumers continue spending despite the troubled housing market. "It shows consumers are out there spending; consumers are not having a credit crunch," said Peter Cardillo, chief market economist at Avalon Partners, after the Commerce Department reported a modest 0.3% rebound in retail sales in July from what had been a weak June.
And the Financial Times reported Citigroup Inc. had lost more than $700 million in credit business in recent weeks. Its stock edged 0.2% higher.
The stock of Blackstone Group LP advanced almost 5% after the private-equity house reported a stronger-than-expected tripling of its second-quarter profit, but also said challenging financial market conditions persist. Blackstone lost $52.3 million during the last 11 days of the second quarter.
Shares of J.P. Morgan Chase Co. gained 1% after an upgrade from Deutsche Banc to buy from hold.
And Accredited Home Lenders Holdings Co. was under pressure after private equity firm Lone Star Funds said it no longer plans to complete its tender offer for the mortgage lender due to the company's weakening financial position. Shares of Accredited Home Lenders declined about 32%.
Home builder Hovnanian Enterprises Inc. said it delivered 31% fewer homes in its fiscal third quarter and it would take pre-tax charges of $90 million to $110 million on land impairment and development cost write-offs. Its stock fell 1%.
Sears Holdings gained 4% after it warned on second-quarter profit but added $1.5 billion to its stock buybak authorization plan.
The dollar fell 0.09% against the yen at 118.23 yen. The euro was down 0.5% at $1.3627.
Crude-oil prices rose sharply, with September crude climbing $1.53 cents, or 2.1%, at $73 a barrel.
Treasury prices pulled lower, with the benchmark 10-year not off 5/32 at 99 13/32, pushing its yield up to 4.826%.
Gold futures were flat, as a rise in the dollar squeezed demand for the precious metal. Gold for December deliver dropped 50 cents to stand at $681.10 an ounce on the New York Mercantile Exchange.
On Friday the major averages managed to eek out minor gains for the week after a week of volatile trade featuring wild swings in either direction, especially in the final 30 minutes of trade.
By Kate Gibson