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NEW YORK – A rising wave of optimism lifted Wall Street Monday, propelling the Dow Jones industrials up more than
400 points on more signs of a reviving credit market and support from Federal Reserve Chairman Ben Bernanke
for further steps to aid the economy. All the major indexes finished with gains
of 3 percent or more.
Investors who had sold furiously in recent weeks in response to immobile
credit markets became more optimistic as bank-to-bank lending rates eased
further. There's also less demand for ultra-safe Treasury bills, another sign that the credit markets
are gradually returning to a healthier state.
The improvement in lending rates helped temper concerns that tight credit
will contribute to a prolonged recession, but Bernanke still warned that the
economy is likely to be "weak for several quarters, and with some risk of a
protracted slowdown."
But he also told the House Budget Committee that a fresh round of government
measures might help ease the country's economic weakness. There were no details
but the White House said it was open to ideas that Congress might put forth.
"The market liked what Bernanke had to say, and there were hints that he's
leaving the door open for further moves in terms of rate cuts or economic stimulus," said Ryan Larson,
head of equity trading at
Voyageur Asset Management. "And, with credit easing in slow baby steps, the
market has started to realize that this is going to be a process."
Wall Street was also sifting
through the first of hundreds of earnings reports expected this week, seeking
clues about future business conditions. Among those reporting, oilfield services
provider Halliburton Co. topped estimates, and CEO Dave Lesar told investors and
analysts in a conference call, "We expect that any major macroeconomic
disruptions will ultimately correct themselves."
Trading was orderly for much of the day, but the final hour again saw
frenetic activity, this time to the upside, with the Dow rising nearly 140
points in the last 25 minutes. The market's tone was clearly better than during
the previous two weeks, when investors' heightened anxiety about credit markets
and the economy sent stocks plunging. The relative calm in Friday's session,
when the Dow fell 127, and Monday's trading, had more investors feeling
confident that the worst of the market's losses was behind it.
Still, with back-and-forth trading a hallmark during recoveries from plunges
in the past, analysts and investors were also expecting that Wall Street would
be subject to volatile price swings for some time.
"We don't have any sense if this kind of a run is sustainable," said Phil
Orlando, chief equity market strategist at Federated Investors. "We're groping quite literally
for a bottom right here, but I'm not going to discount that we won't retest lows
over the next couple of weeks."
The Dow rose 413.21, or 4.67 percent, to 9,265.43. The blue chips' gain were in line with a 4.68 percent gain
registered Thursday, when the Dow jumped 401 points.
The rally marked the Dow's 23rd triple-digit move in 26 sessions. Most
sessions have brought losses, however, with 11 of the past 14 showing
declines.
Broader indexes also rose sharply Monday. The Standard & Poor's 500 index jumped 44.85, or
4.77 percent, to 985.40. The Nasdaq
composite index rose 58.74, or 3.43 percent, to 1,770.03.
Despite the advances of recent sessions, the major indexes remain well below
their peaks of a year ago. the Dow is down 34.6 percent, the S&P 500 is down 37 percent and
the Nasdaq composite index is off 38.1 percent.
The credit markets were gradually responding to the series of bailout
measures by governments around the world, including a joint U.S. and European
plan to buy stakes in private
banks to boost their lending. Demand for Treasury bills, regarded as the safest assets around,
lessened Monday but remained relatively high in a sign that there was still much
fear in the markets.
The three-month Treasury bill Monday yielded 1.12 percent, up from 0.82
percent late Friday. That's better than the 0.20 percent of last Wednesday, and
the first time it surpassed 1 percent in more than a week.
Investors were also optimistic about the steady decline in interbank lending
rates, which fell for a sixth straight day Monday. The London interbank offered rate, or Libor, for three-month dollar loans
fell 0.36 percent to 4.06 percent, the biggest daily drop since January.
The benchmark 10-year Treasury note rose. The yield, which moves opposite its
price, fell to 3.87 percent from 3.93 percent late Friday.
Todd Leone, managing director of equity trading at Cowen & Co., said many
investors were feeling optimistic that credit is slowly becoming more available.
He also believes that Bernanke's remarks, along with the fact earnings haven't
been dismal, are helping markets move higher.
"People are just getting comfortable with buying again," said Todd Leone,
managing director of equity trading at Cowen & Co. "We still could see
another big drop, but those big drops are going to get less and less."
Investors also received a bit more detail about how Treasury Secretary Henry Paulson plans to roll out a
$250 billion plan to recapitalize banks. Paulson said the government will own
shares in the banks that should be paid back with a reasonable return, and
expects that the investment will eventually make money.
Meanwhile, there were some optimistic data that showed the economy's health
improved for the first time in five months in September as supplier deliveries
and new orders strengthened, a private research group said Monday. The New
York-based Conference Board said its monthly forecast of future economic
activity rose 0.3 percent, a much better reading than the 0.2 percent drop
expected by Wall Street
economists surveyed by Thomson/IFR.
Light, sweet crude rose $2.40 to settle at $74.25 a barrel on the New York Mercantile Exchange. Last
week, it sank to an almost 16-month low on worries about a deep global recession
obliterating fuel demand.
The Russell 2000 index of
smaller companies rose 20.41, or 3.88 percent, to 546.84.
Advancing issues outpaced decliners by about 5 to 1 on the New York Stock Exchange, where
consolidated volume came to 5.1 billion shares compared with 6.48 billion
shares.
Financial markets overseas also jumped. Japan's Nikkei stock average closed
up 3.59 percent. Britain's FTSE
100 rose 5.41 percent, Germany's DAX index advanced 1.12 percent, and France's CAC-40 rose 3.56 percent.
