Dow jumps almost 500 points Wall Street posts its best day since November as investors welcome Obama administration plan to buy close to $1 trillion in bad bank assets. By Alexandra Twin, CNNMoney.com senior writer Last Updated: March 23, 2009: 5:49 PM ET
NEW YORK (CNNMoney.com) -- Stocks surged Monday, recharging the rally, after Treasury's plan to buy up billions in bad bank assets and a better-than-expected existing home sales report raised hopes that the economy is stabilizing.
The Dow Jones industrial average (INDU) gained 497 points, seeing its biggest one-day point gain since Nov. 21. The gain was equivalent to 6.8%, which was the biggest one-day percentage gain since Oct. 28.
The S&P 500 (SPX) index rose 54 points, its best one-day point gain since Nov. 13. The percentage gain of 7.1% was the best since Oct. 28.
The Nasdaq composite (COMP) added 99 points or 6.8% for the best one-day point and percentage gain since Oct. 28.
"I think the stock reaction is a vote of confidence in the plan," said Jack Ablin, chief investment officer at Harris Private Bank.
He said the stock market is also reacting well because the plan is skewed in favor of the private investor, who only has to be responsible for around 7% of the total in any transaction.
But other analysts were less sanguine. "The plan is a rehash of what we've seen before and it still doesn't resolve the issue of how to value the bad assets," said Stephen Leeb, president at Leeb Capital Management.
"There's a lot of cash on the sidelines, there's a real wish to believe that this is a solution and there has been some good news on the economy lately," he said. "All of that is contributing to a rally as well."
Stocks have gained for the past two weeks, despite tumbling last Thursday and Friday. But that retreat gave investors an opportunity to jump back in Monday, with bank shares leading the advance.
Since tumbling to 12-year lows two weeks ago, the S&P 500 has now rallied 18% as of Monday's close, blasting through 800, a key resistance level that analysts have been watching.
Tuesday brings more news from Washington. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner are expected to testify at a House Financial Services Committee hearing on AIG, due to begin at around 10:00 a.m. ET.
Sheila Bair, Chairman of the Federal Deposit Insurance Corp, is due to testify at a Senate Banking Committee hearing on bank regulation, also scheduled for the morning.
President Obama is due to deliver a televised address during prime time.
Bad-asset plan: On Monday, Treasury rolled out its long-awaited plan to purge bank balance sheets of as much as $1 trillion in sour assets that are limiting lending and prolonging the recession.
The government will commit $75 billion to $100 billion of taxpayer money to launch the "Public-Private Investment Program," which seeks to create a market for that bad debt.
The government plans to run auctions between the banks looking to unload the bad assets - such as subprime mortgages - and the investors looking to buy them. The Federal Reserve and the Federal Deposit Insurance Corp. will be involved.
Economists have said that stabilizing the banking system is key to stabilizing the economy.
"Between the Fed announcement last week and the Treasury program this week, there are some tangible steps the government is taking and that is going to give the market the potential to keep moving higher," Ablin said.
Last week, the Federal Reserve announced it was pumping another trillion into the economy to try to get credit flowing.
Leeb said the market may be betting that if the Treasury plan leads into a brick wall, there's always the Federal Reserve to come in and expand its program.
Economy: Existing home sales rose 5.1% in February, according to the National Association of Realtors. Sales rose at a seasonally-adjusted 4.72 million unit annual rate versus a 4.49 million unit annual rate in January. Economists surveyed by Briefing.com expected sales to dip to a 4.45 million unit rate.
Company news: Financial shares led the advance. American Express gained almost 19%, Citigroup (C, Fortune 500) jumped 19.5%, JPMorgan Chase (JPM, Fortune 500) gained Bank of America (BAC, Fortune 500) jumped 26% and Wells Fargo (WFC, Fortune 500) gained 24%. The KBW Bank (BKX) index gained 18.6%.
The gains were broad based, with all 30 Dow components rising. Other big gainers included Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500), General Electric (GE, Fortune 500), Boeing (BA, Fortune 500) and Walt Disney (DIS, Fortune 500).
Suncor Energy (SU), Canada's No. 2 oil company, said it will buy rival Petro-Canada (PCZ) for $14.86 billion to create the country's biggest energy company. Suncor shares lost 1.8% and Petro shares gained 23%.
In other deal news, an Abu Dhabi fund, Aabar Investments, bought a 9.1% stake in German carmaker Daimler in a $2.67 billion deal announced late Sunday.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by over 8 to 1 on volume of almost 1 billion shares. On the Nasdaq, advancers topped decliners four to one on volume of 1.5 billion shares.
Bonds: Treasury prices dipped, raising the yield on the benchmark 10-year note to 2.64%, up from 2.63% late Friday. Treasury prices and yields move in opposite directions.
Lending rates were little changed. The 3-month Libor rate held steady at 1.22%, unchanged from late Friday, while the overnight Libor rate rose to 0.29% from 0.28% Friday, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian and European markets rallied.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for May delivery gained $1.73 to settle at $53.80 a barrel on the New York Mercantile Exchange.
COMEX gold for May delivery fell $3.60 to settle at 953.80 an ounce.
Yahoo! Finance
4:30 pm : The Treasury Department released details related to its plan to remove bad assets from banks' balance sheets, sparking a massive surge in the stock market. In addition, the market benefited from a better-than-expected existing home sales report.
In the end, the S&P 500 spiked 7.1%, settling at session highs thanks to a late afternoon rally.
The Treasury plans to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies. In a show of support, Bill Gross, co-Chief Investment Officer of the world's largest bond fund, told Reuters that Pimco plans to participate in the program.
Meanwhile, FDIC Chairman Bair said that the public-private investment program will likely make money for the FDIC, according to Reuters. Bair also said that 6-to-1 is the outer range of leverage it will provide for the program, Reuters reported.
The financial sector rallied a massive 17% on the news, with diversified financial services climbing 24.5% and diversified banks up 22.3%.
The move was broad-based as all ten of the economic sectors rose, with gains of at least 3.8%. The energy sector (+7.8%) finished second to financials, outperforming as May crude oil futures climbed 3.5%. Defensive sectors however, underperformed on a relative basis, but still posted solid advances.
In economic news, existing home sales in February rose 5.1% month-over-month to a seasonally adjusted annual rate of 4.72 million, according to the National Association of Realtors. Economists expected a 0.9% month-over-month drop to 4.45 million. A substantial portion of the sales were from first time homebuyers and distressed properties.
The increase is a positive for the market, though sales still remain at depressed levels. While low interest rates and increased affordability are encouraging developments, the housing sector continues to face high levels of inventory, tight credit conditions and the deleveraging of consumers.
Looking ahead, Bernanke and Geithner testify to the House Financial Services Committee on AIG (AIG 1.48, +0.22) at 10:00ET tomorrow morning.DJ30 +497.48 NASDAQ +98.50 SP500 +54.38 NASDAQ Adv/Vol/Dec 2262/2.26 bln/429 NYSE Adv/Vol/Dec 2863/1.91 bln/259
3:30 pm : The stock market's upward momentum stalls, and then the market climbs higher with the S&P 500 up more than 5.5%.
In energy commodities, May crude oil ($53.75 +$1.68) did most of its moving in morning trade, when it ran to highs at $54.05, marking its highest levels since late November 2008. It spent the latter half of the session chopping around those highs, where it closed on the day. April natural gas ($4.294 +$0.067) experienced the same type of chop after hitting highs at $4.35 in mid-morning trade. It attempted to take out those highs heading into the afternoon before sliding lower into the close. April RBOB gasoline closed the session higher by 2.3 cents to $1.48 and April heating oil finished the day higher by 2.71 cents to $1.3834.
In metals, It was a quiet day for precious metals, with both April gold ($952.50 -$3.70) and May silver ($13.875 +$0.035) failing to set a definitive direction. Gold and silver ticked into negative territory in early morning trade, and set lows at $945.50 and $13.615, respectively. Silver was able to recoup all of its losses to close the day modestly higher, while gold was only able to move modestly higher off its lows. Meanwhile, May copper ended the session higher by 4.5 cents to $1.841.DJ30 +398.56 NASDAQ +74.56 SP500 +42.54 NASDAQ Adv/Vol/Dec 2198/1.66 bln/465 NYSE Adv/Vol/Dec 2829/1.14 bln/291
3:00 pm : The major indices manage to push through previous levels to establish fresh session highs.
FDIC Chairman Bair said that the public-private investment program will likely make money for the FDIC, according to Reuters. Bair also said that 6-to-1 is the outer range of leverage it will provide for the program, Reuters reports.
Meanwhile, Reuters also said that key Republican senators are seeking to delay debating the special taxes on AIG bonuses for at least one week.DJ30 +369.09 NASDAQ +67.56 SP500 +39.57 NASDAQ Adv/Vol/Dec 2157/1.46 bln/500 NYSE Adv/Vol/Dec 2811/1.02 bln/293
2:30 pm : The major indices continue to hold the bulk of this session's advance. All ten sectors are posting a gain, ranging from 1.5% (utilities) to 10.2% (financials).
European markets settled with solid gains as they tracked the advance in the U.S. London's FTSE rose 2.9%, Germany's DAX rose 2.7% and France's CAC climbed 2.8%.DJ30 +299.47 NASDAQ +54.61 SP500 +32.33 NASDAQ Adv/Vol/Dec 2086/1.30 bln/562 NYSE Adv/Vol/Dec 2746/916 mln/348
1:55 pm : After pulling back from session highs, the major indices are regaining some ground. Meanwhile, Treasuries have dipped a bit, with the 10-year down five ticks and the 30-year down 12 ticks.DJ30 +282.99 NASDAQ +52.78 SP500 +30.34 NASDAQ Adv/Vol/Dec 2098/1.19 bln/542 NYSE Adv/Vol/Dec 2748/842 mln/334
1:30 pm : The market continues to hold the bulk of today's gains as sellers continue to stick to the sidelines for the most part.
Still, the S&P 500 is having some difficulty stretching well past the 800 level, which is a technical barrier as it approximates the lows from January and is in close proximity to what is known as the 50-day simple moving average (now 796), which has provided stern resistance during prior recovery efforts.
Separately, despite all of the talk about the consumer's demise, it is worth noting that the S&P Retailing Index, with today's gain (+4.0%), has turned positive for the year (+1.0%).DJ30 +289.68 NASDAQ +55.01 SP500 +31.89 NASDAQ Adv/Vol/Dec 2176/1.05 bln/529 NYSE Adv/Vol/Dec 2739/742 mln/124
1:00 pm : The major indices are sharply higher at midday as they trade near session highs, with gains fueled by the release of details regarding the Treasury Department's plan to remove bad assets from banks' balance sheets. In addition, the market is benefiting from a better-than-expected existing home sales report.
The Treasury plans to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies. Bill Gross, co-Chief Investment Officer of the world's largest bond fund, told Reuters that Pimco plans to participate in the program.
The financial sector (+9.9%) is rallying on the news, with diversified financial services up 14.3% and diversified banks up 11.1%.
All ten of the economic sectors are in positive territory, with gains of at least 2%. The energy sector (+5.8%) is also outperforming as May crude climbs 2.6%. Defensive sectors are underperforming on a relative basis, but are still posting solid advances.
In economic news, existing home sales in February rose 5.1% month-over-month to a seasonally adjusted annual rate of 4.72 million, according to the National Association of Realtors. Economists expected a 0.9% month-over-month drop to 4.45 million. A substantial portion of the sales were from first time homebuyers and distressed properties.
The increase is a positive for the market, but sales still remain at depressed levels. The housing sector continues to face high levels of inventory, tight credit conditions and the deleveraging of consumers.DJ30 +302.50 NASDAQ +57.35 SP500 +32.77 NASDAQ Adv/Vol/Dec 2114/998 mln/492 NYSE Adv/Vol/Dec 2769/721 mln/292
12:35 pm : The details of the Treasury's plan to buy troubled assets and the better-than-expected housing data continues to support stocks. Treasuries have shown limited movement the last hour, with the 2-year, 10-year and 30-year all nearly unchanged on the day.DJ30 +324.80 NASDAQ +60.89 SP500 +34.98 NASDAQ Adv/Vol/Dec 2116/915 mln/452 NYSE Adv/Vol/Dec 2790/669 mln/266
12:00 pm : The major indices set new session highs. The stock market is now up more than 4%.
Meanwhile, the dollar index is unchanged, while commodities are up 1.2%.DJ30 +317.16 NASDAQ +61.46 SP500 +34.38 NASDAQ Adv/Vol/Dec 2090/788 mln/432 NYSE Adv/Vol/Dec 2773/590 mln/260
11:30 am : The major indices trade slightly below their recently reached session highs.
According to Reuters, Pimco co-chief investment officer Bill Gross said that the bond fund plans to participate in the Treasury's public-private plan to purchase troubled assets.DJ30 +275.74 NASDAQ +51.27 SP500 +29.54 NASDAQ Adv/Vol/Dec 2033/669 mln/455 NYSE Adv/Vol/Dec 2731/518 mln/269
11:00 am : The major indices continue to trade with solid gains in broad-based strength, with the S&P 500 trading at the 800 level.
The tech sector is up 3.5% this session, sending it into positive territory for the year with a gain of 2.6%. Similarly, retailers are up 3.1%, sending the industry group into positive territory with a gain of 0.2%.DJ30 +299.47 NASDAQ +51.98 SP500 +31.59 NASDAQ Adv/Vol/Dec 2024/558 mln/432 NYSE Adv/Vol/Dec 2727/447 mln/246
10:35 am : The major indices continue to extend their gains in reaction to the better-than-expected housing number. Financials are up 9.2%, followed by energy stocks with a gain of 5.1%. Commodities are mixed.
In energy, May crude oil (53.34, +1.27), the new front month, was higher in overnight trade, chopping around the $52.50 level. However, heading into the open of pit trade, crude started to give those gains back. Following the open of pit trade, crude fell to a slight loss, but recovered to positive ground as stocks gained following the better-than-expected housing data. April natural gas (4.409, +0.10), which expires on Friday, spent the overnight session trading near the flat line, but has slowly trended higher into positive territory. Following the open of pit trade, it climbed to session highs.
In metals, April gold (949.70, -8.80) and May silver (13.65, -0.19) are lower this morning, after both metals chopped around the flat line in overnight trade.DJ30 +269.38 NASDAQ +47.91 SP500 +28.73 NASDAQ Adv/Vol/Dec 1978/389 mln/395 NYSE Adv/Vol/Dec 2705/330 mln/208
10:05 am : The major indices extend their gains as a better-than-expected existing home sales reading is released.
Existing home sales in February rose 5.1% month-over-month to a seasonally adjusted annual rate of 4.72 million, according to the National Association of Realtors. Economists expected a 0.9% month-over-month drop to 4.45 million. The increase is a positive for the market, but sales still remain at depressed levels. The housing sector continues to face high levels of inventory, tighter credit conditions and the deleveraging of consumers.DJ30 +210.19 NASDAQ +38.40 SP500 +23.72 NASDAQ Adv/Vol/Dec 1934/257 mln/372 NYSE Adv/Vol/Dec 2625/243 mln/225
09:35 am : The major indices open with significant gains on optimism over the Treasury Department plan to buy bad assets from banks. Buying interest is broad-based as all ten sectors trade with solid gains.
As expected, financials are leading the advance, with the sector up 7.2%.DJ30 +141.61 NASDAQ +26.96 SP500 +16.63
09:20 am : S&P futures vs fair value: +14.50. Nasdaq futures vs fair value: +21.00. Futures rallied to hit session highs around 8:00ET on news that the Treasury was going to announce its plan to relieve banks of its bad assets. Although a sharply higher start is still expected, futures have been trending lower from session highs after the Treasury confirmed its plan at 8:00ET. The program plans to to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies. Shares of financials are rallying on the news, with Citigroup (C) up 23.3%, Bank of America (BAC) up 17.0% and Wells Fargo (WFC) up 11.4% in premarket trading. Looking ahead on the economic calender, the existing home sales report is due at 10:00ET.
08:59 am : S&P futures vs fair value: +15.40. Nasdaq futures vs fair value: +22.00. A strong start to the session is still expected, though futures have been giving back some gains, with S&P 500 futures down roughly 10 points from its session high. In overseas trade, Asian markets rallied ahead of the U.S. Treasury confirmation of its plan to relieve banks of troubled assets. Japan's Nikkei, which was closed Friday for a Holiday, rose 3.4%, with banks leading the rally on optimism over the Treasuries plan. Hong Kong's Hang Seng rallied 4.8% and mainland China's Shanghai Composite rose 2.0% as banks rose and the official China Securities Journal quoted a senior finance ministry economist as saying that the mainland is prepared for more fiscal stimulus if warranted by second quarter data. Despite the strength seen in most financial stocks, HSBC underperformed on a relative basis in Hong Kong with a rise of 0.6% as the UK bank's discounted stock offering began trading. In Europe, markets are higher as financial stocks respond positively to the U.S. bad asset plan. In the UK, the FTSE is up 0.5% as banking and insurance stocks rise, also getting a boost from the mining sector. In German, the DAX is up 1.0% and France's CAC climbed 1.1%, also led by strength in banks and insurers.
08:31 am : S&P futures vs fair value: +17.80. Nasdaq futures vs fair value: +22.00. Futures have been giving up some gains following the Treasury's 8:00ET press release regarding its bad asset plan. Despite the dip, a sharply higher start is still expected. In earnings news, shares of Walgreen (WAG) are up 5.2% in premarket trade after the company reported earnings of $0.65 per share, which missed the consensus estimate by a penny, but did post better-than-expected revenue of $16.5 billion ($16.4 billion consensus).
08:10 am : S&P futures vs fair value: +22.30. Nasdaq futures vs fair value: +29.00. Futures indicate a sharply higher start, and are trading near recently reached session highs, on news of the Treasury Department's plan to relieve banks of bad assets. Confirmed at 8:00ET, the program plans to to create a series of public-private investments funds to buy $500 billion to $1000 billion in legacy loans and securities. To encourage participation from the private sector, the government is taking on much of the risk and offering subsidies. Looking ahead on the economic calender, the existing home sales report is due at 10:00ET.
07:06 am : S&P futures vs fair value: +21.20. Nasdaq futures vs fair value: +29.80.
07:06 am : Nikkei...8215.53...+269.60...+3.40%. Hang Seng...13447.42...+613.90...+4.80%.
07:06 am : FTSE...3908.15...+65.30...+1.70%. DAX...4141.63...+72.90...+1.80%.
Users browsing this forum: No registered users and 1 guest
You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot post attachments in this forum
Login
Register
FAQ
Search
