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NEW YORK - Financial markets grew more upbeat Thursday as political
leaders said they struck an agreement in principle on a massive
spending plan to revive the crippled financial system. The Dow Jones
industrial average jumped about 200 points on optimism about the
bailout, and demand for safe-haven assets remained high but eased
slightly as some investors placed bets that a deal would help unclog
credit markets.
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Stock market investors got a lift when key lawmakers said they would
present the $700 billion plan to the Bush administration and hoped for
a vote by both houses of Congress within days. Still, some resistance
remained from House Republicans as the closing bell on Wall Street
rang ahead of a meeting of congressional leaders at the White House.
And after the close of trading, it was clear that plan could still
face some obstacles. Stock futures weakened, signaling a lower open
Friday, after Sen. Richard Shelby, the top Republican on the Banking
Committee, left the White House meeting and said the announced deal
"is, obviously, no agreement."
Trading that has been difficult for more than a week is likely to
remain so in the coming days.
"The market's going to experience volatility as the terms become
known," said Doug Roberts, chief investment strategist at Channel
Capital Research.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben
Bernanke urged lawmakers Tuesday and Wednesday to quickly sign off on
the plan, which they said would help prop up the economy by removing
billions of dollars in risky mortgage-related assets from financial
firms' balance sheets. Fear of heavy losses on these assets has made
banks hesitant to extend credit, which in turn threatens the overall
economy by making it harder and more expensive for businesses and
consumers to borrow money.
President Bush highlighted what he sees as the urgency in a national
address Wednesday night. Major elements are still being worked out,
including how to phase in the mammoth cost of the package and whether
the government will get an ownership stake in troubled companies.
Alan Lancz, director at investment research group LanczGlobal, said
stock market investors were encouraged that the rescue looked more
likely than it had earlier in the week. He said the move could help
unclog credit markets by allowing banks and investors to place values
on assets tied to mortgages.
"How do you establish a floor? Well, this is the bazooka. This is how
you establish a floor," he said of the plan's goal of buying up the
toxic debt.
Still, some investors had their doubts. Demand eased but remained high
for the 3-month Treasury bill, considered the safest short-term
investment. Its yield rose to 0.72 percent from 0.49 percent late
Wednesday. That means investors are still willing to earn the slimmest
of returns in exchange for a safe place to put their money. The yield
on the benchmark 10-year Treasury note, which moves opposite its
price, rose to 3.84 percent from 3.81 late Wednesday.
The Dow rose 196.89, or 1.82 percent, to 11,022.06. The gain helped
erase some of the losses from heavy selling earlier in the week,
though the blue chips still remain down by more than 360 points, or
3.2 percent.
Broader stock indicators also rose Thursday. The Standard & Poor's 500
index advanced 23.31, or 1.97 percent, to 1,209.18 and the Nasdaq
composite index rose 30.89, or 1.43 percent, to 2,186.57.
Advancing issues outnumbered decliners by nearly 3 to 1 on the New
York Stock Exchange, where consolidated volume came to 5.73 billion
shares, compared with 4.66 billion traded Wednesday.
Roberts noted that the market's back-and-forth moves of late might be
unnerving for investors but ultimately can leave stocks with little to
show for all the volatility.
"Most of this is just oscillating around a straight line," he said,
noting that last week's huge daily moves, which also included triple-
digit moves in the Dow, left stocks largely unchanged for the week.
The dollar was mixed against other major currencies Thursday, while
gold prices fell.
Light, sweet crude for November delivery rose $2.29 to settle at
$108.02 a barrel on the New York Mercantile Exchange.
Meanwhile, disappointing readings on employment, housing and demand
for big-ticket manufactured goods, as well as a sobering forecast from
General Electric Co., underscored the difficulties facing the economy.
The Labor Department said the number of people seeking unemployment
benefits increased by 32,000 to a seasonally adjusted 493,000 last
week — the highest level in seven years and well above analysts'
expectations of 445,000. Hurricanes Ike and Gustav added about 50,000
new claims in Louisiana and Texas, the department said.
The Commerce Department said sales of new homes fell sharply in August
to the slowest pace in 17 years. The average sales price also fell by
the largest amount on record. New homes sales dropped by 11.5 percent
in August to a seasonally adjusted annual sales rate of 460,000 units,
the slowest sales pace since January 1991.
The department also said orders for expensive manufactured goods sank
in August by the largest amount in seven months as demand for both
airplanes and cars sank. Durable goods orders fell by 4.5 percent last
month, far worse than the 1.6 percent decline that economists expected
and the biggest drop since a 4.7 percent fall in January.
GE lowered its forecast for third-quarter and full-year earnings,
citing unprecedented weakness and volatility in the financial services
markets. The stock, which had declined in the early going, finished up
$1.09, or 4.4 percent, to $25.68 alongside the gains in the broader
market.
The Russell 2000 index of smaller companies rose 7.97, or 1.14
percent, to 705.74.
Overseas, Japan's Nikkei stock average fell 0.90 percent. Britain's
FTSE 100 rose 1.99 percent, Germany's DAX index added 1.99 percent,
and France's CAC-40 jumped 2.73 percent.
Milenko Kindl
Banja Luka
Banjaluka
Bihac
leaders said they struck an agreement in principle on a massive
spending plan to revive the crippled financial system. The Dow Jones
industrial average jumped about 200 points on optimism about the
bailout, and demand for safe-haven assets remained high but eased
slightly as some investors placed bets that a deal would help unclog
credit markets.
ADVERTISEMENT
Stock market investors got a lift when key lawmakers said they would
present the $700 billion plan to the Bush administration and hoped for
a vote by both houses of Congress within days. Still, some resistance
remained from House Republicans as the closing bell on Wall Street
rang ahead of a meeting of congressional leaders at the White House.
And after the close of trading, it was clear that plan could still
face some obstacles. Stock futures weakened, signaling a lower open
Friday, after Sen. Richard Shelby, the top Republican on the Banking
Committee, left the White House meeting and said the announced deal
"is, obviously, no agreement."
Trading that has been difficult for more than a week is likely to
remain so in the coming days.
"The market's going to experience volatility as the terms become
known," said Doug Roberts, chief investment strategist at Channel
Capital Research.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben
Bernanke urged lawmakers Tuesday and Wednesday to quickly sign off on
the plan, which they said would help prop up the economy by removing
billions of dollars in risky mortgage-related assets from financial
firms' balance sheets. Fear of heavy losses on these assets has made
banks hesitant to extend credit, which in turn threatens the overall
economy by making it harder and more expensive for businesses and
consumers to borrow money.
President Bush highlighted what he sees as the urgency in a national
address Wednesday night. Major elements are still being worked out,
including how to phase in the mammoth cost of the package and whether
the government will get an ownership stake in troubled companies.
Alan Lancz, director at investment research group LanczGlobal, said
stock market investors were encouraged that the rescue looked more
likely than it had earlier in the week. He said the move could help
unclog credit markets by allowing banks and investors to place values
on assets tied to mortgages.
"How do you establish a floor? Well, this is the bazooka. This is how
you establish a floor," he said of the plan's goal of buying up the
toxic debt.
Still, some investors had their doubts. Demand eased but remained high
for the 3-month Treasury bill, considered the safest short-term
investment. Its yield rose to 0.72 percent from 0.49 percent late
Wednesday. That means investors are still willing to earn the slimmest
of returns in exchange for a safe place to put their money. The yield
on the benchmark 10-year Treasury note, which moves opposite its
price, rose to 3.84 percent from 3.81 late Wednesday.
The Dow rose 196.89, or 1.82 percent, to 11,022.06. The gain helped
erase some of the losses from heavy selling earlier in the week,
though the blue chips still remain down by more than 360 points, or
3.2 percent.
Broader stock indicators also rose Thursday. The Standard & Poor's 500
index advanced 23.31, or 1.97 percent, to 1,209.18 and the Nasdaq
composite index rose 30.89, or 1.43 percent, to 2,186.57.
Advancing issues outnumbered decliners by nearly 3 to 1 on the New
York Stock Exchange, where consolidated volume came to 5.73 billion
shares, compared with 4.66 billion traded Wednesday.
Roberts noted that the market's back-and-forth moves of late might be
unnerving for investors but ultimately can leave stocks with little to
show for all the volatility.
"Most of this is just oscillating around a straight line," he said,
noting that last week's huge daily moves, which also included triple-
digit moves in the Dow, left stocks largely unchanged for the week.
The dollar was mixed against other major currencies Thursday, while
gold prices fell.
Light, sweet crude for November delivery rose $2.29 to settle at
$108.02 a barrel on the New York Mercantile Exchange.
Meanwhile, disappointing readings on employment, housing and demand
for big-ticket manufactured goods, as well as a sobering forecast from
General Electric Co., underscored the difficulties facing the economy.
The Labor Department said the number of people seeking unemployment
benefits increased by 32,000 to a seasonally adjusted 493,000 last
week — the highest level in seven years and well above analysts'
expectations of 445,000. Hurricanes Ike and Gustav added about 50,000
new claims in Louisiana and Texas, the department said.
The Commerce Department said sales of new homes fell sharply in August
to the slowest pace in 17 years. The average sales price also fell by
the largest amount on record. New homes sales dropped by 11.5 percent
in August to a seasonally adjusted annual sales rate of 460,000 units,
the slowest sales pace since January 1991.
The department also said orders for expensive manufactured goods sank
in August by the largest amount in seven months as demand for both
airplanes and cars sank. Durable goods orders fell by 4.5 percent last
month, far worse than the 1.6 percent decline that economists expected
and the biggest drop since a 4.7 percent fall in January.
GE lowered its forecast for third-quarter and full-year earnings,
citing unprecedented weakness and volatility in the financial services
markets. The stock, which had declined in the early going, finished up
$1.09, or 4.4 percent, to $25.68 alongside the gains in the broader
market.
The Russell 2000 index of smaller companies rose 7.97, or 1.14
percent, to 705.74.
Overseas, Japan's Nikkei stock average fell 0.90 percent. Britain's
FTSE 100 rose 1.99 percent, Germany's DAX index added 1.99 percent,
and France's CAC-40 jumped 2.73 percent.
Milenko Kindl
Banja Luka
Banjaluka
Bihac