Wall Street Boosted by Insurer's Confidence

NEW YORK, Jan. 31 -- A forceful presentation by the executives of embattled bond insurer MBIA in a conference call ignited a rally in U.S. stocks Thursday, helping investors overcome worries about the possibility of a U.S. recession.

The major stock indicators all closed up 1.7 percent after the markets opened sharply lower on a discouraging earnings report from MBIA and the release of government data indicating an economic slowdown. Almost immediately after the start of the late-morning call to discuss the disappointing earnings, the bond insurer's shares rebounded from their early loss, taking other stocks in the financial services sector with them.

In the call, Gary Dunton, MBIA's chief executive, vowed to keep the company's AAA credit rating and said MBIA would have more than enough capital to back it. He dismissed persistent market rumors of a bankruptcy, saying the stock price, which is down 80 percent from a year ago, was unjustified despite the significant losses. MBIA reported Thursday that it had posted a fourth quarter loss of $2.3 billion after writing down $3.5 billion of complicated securities linked to subprime mortgages.

"No serious analyst expects that we will have $7 billion of economic losses on our portfolio," Dunton said. "So our own conclusion is that the market has overreacted to the real and obvious problems that we've had, as well as to the fear-mongering and intentional distortions of facts about our business that have been pumped into the market by self-interested parties."

MBIA, the largest company in its field, plays a critical role in capital markets by insuring bonds issued by governments for public projects and billions of dollars in riskier securities that have fallen in value during the subprime-mortgage mess.

Dunton's feisty comments helped turn the stock market positive by noon, and it gained momentum throughout the remainder of the day. The Dow Jones industrial average of 30 blue-chip stocks rose 207.53 points to 12650.36. The Standard & Poor's 500-stock index, a broader market measure, was up 22.74, to 1378.55. The tech-heavy Nasdaq composite index gained 40.86, to 2389.86.

Stocks were also lifted by lower oil prices, which fell on rising fuel inventories and concern about a possible downturn in the U.S. economy, which could hurt demand. Light, sweet crude for March delivery was down 58 cents, to $91.75 a barrel, on the New York Mercantile Exchange.

Although economic data released Thursday morning was not encouraging, investors put aside worries of a recession, at least for the time being. According to the Labor Department, the number of people filing new jobless claims increased by 69,000, to 375,000, in the week ended Jan. 26. The jump, larger than analysts expected, brings claims to the highest level in more than two years.

A separate report from the Commerce Department showed personal consumption in the United States rose just 0.2 percent in December, far short of the jump the previous month.

David Dietze, chief investment strategist at Point View Financial Services, said two factors have been driving markets in recent days -- Wednesday's interest rate cut by the Federal Reserve, which generally helped stocks, and concern over bond insurers such as MBIA.

Movers

MBIA rose $1.54, or 11 percent, to $15.50.

Citigroup rose 61 cents, or 2.2 percent, to $28.17.

KB Home rose $2.32, or 9.2 percent, to $27.50.