Wall Street soars on financials, stability plans
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Fri, 19 Sep 2008 16:58:07 GMT |
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By Ellis MnyanduNEW YORK (Reuters) - Stocks rallied on Friday, led by a surge in financials, after the government unveiled plans to mop up bad assets and place a temporary ban on bets that financial stocks will fall.In addition, the U.S. Treasury said it will establish a program to guarantee money market fund holdings, aiming to prevent Wall Street's losses from spilling over into the wider economy.The rally, coming a day after Wall Street scored its best day in six years, drove shares of Bank of America , the No. 2 U.S. bank, up 21.6 percent to $37.17, making the stock the top boost to the Dow and the second-biggest advancer in the S&P 500.Shares of No. 3 U.S. bank JPMorgan Chase , up more than 13 percent at $45.67, were the Dow's second-best performer. The S&P financial index jumped 10.9 percent.Led by Treasury Secretary Henry Paulson, officials are working on a solution to take over hundreds of billions of dollars worth of soured bank assets that have crippled the global financial system.In another bid to stabilize markets, U.S. securities regulators joined regulators from other countries in temporarily banning short sales of financial shares.The stabilization measures helped calm nerves on the last day of a tumultuous week in which Lehman Brothers Holdings filed for bankruptcy protection and the U.S. government bailed out insurer American International Group .Investors had worried that the financial upheaval, which earlier this week froze lending among banks as the crisis of confidence escalated, would hurt the economy and curb profits."I think people are excited about what's going on, but at the same time, they are still waiting for the dust to settle," said Ray Rund, managing director and head of research at Shaker Investments in Cleveland, Ohio. "The devil is always in the details."The Dow Jones industrial average <.DJI> shot up 435.11 points, or 3.95 percent, to 11,454.80. The Standard & Poor's 500 Index <.SPX> gained 53.84 points, or 4.46 percent, to 1,260.35. The Nasdaq Composite Index <.IXIC> leaped 77.17 points, or 3.51 percent, to 2,276.27.The rally restored the blue-chip Dow average back to just above the break-even point for the week, after being off nearly 1,000 points since last Friday during the market's earlier plunge.Shares of Washington Mutual climbed 27.4 percent to $3.81 after the Wall Street Journal reported that Citigroup was considering making a bid for the U.S. savings and loan.Citigroup shares leaped 27.2 percent to $21.49 on the New York Stock Exchange.Shares of Morgan Stanley , pummeled earlier this week as investors fretted about the outlook for the last two remaining U.S. investment banks, jumped nearly 35 percent to $30.51.Shares of rival Goldman Sachs climbed 24.3 percent to $13.29.Morgan Stanley is engaged in deal talks with among others, regional banking powerhouse Wachovia Corp , a source said. Wachovia's stock surged 37.8 percent to $19.98.On Nasdaq, shares of Apple Inc , the maker of the iPhone, ranked as the top advancer, up almost 7 percent at $143.31.The U.S. Securities and Exchange Commission slapped a ban on short selling of nearly 800 financial stocks. On Thursday, British authorities also issued a ban on short selling.Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares and then sell them, waiting for the stock to fall so they can buy the shares back at the lower price, return them to the lender and pocket the difference.(Editing by Jan Paschal)
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