Financial Stocks Lift Market While Tech Shares Falter

Sunday, July 20, 2008

U.S. stocks rallied last week, halting a six-week slide, after earnings from J.P. Morgan Chase and Wells Fargo topped analysts' estimates and regulators stepped up efforts to buoy the major mortgage-finance firms.

Banks had their steepest weekly jump since the rescue of Bear Stearns in March. Fannie Mae and Freddie Mac surged after the Securities and Exchange Commission said it would limit traders' ability to bet on a drop in the shares. And General Motors led an advance in stocks dependent on consumer spending as oil prices slid the most in three years.

The Standard & Poor's 500-stock index rose 1.7 percent last week, to 1260.68. The equity benchmark earlier this month slid more than 20 percent, the threshold for a bear market, from its October peak on record oil prices and concerns about financial firms' liquidity. The Dow Jones industrial average added 3.6 percent, to 11,496.57, after a three-day rally that was the biggest in five years.

Financial companies in the S&P 500 climbed more than 11 percent last week after J.P. Morgan, Wells Fargo and Citigroup exceeded analysts' second-quarter forecasts. The results eased investor concern about how much more money the industry needs to raise after $447 billion in losses tied to the subprime-mortgage meltdown.

Fannie Mae and Freddie Mac jumped 31 percent and 18 percent, respectively, after sliding to 17-year lows on concern they don't have enough capital. The SEC said Tuesday that it would limit short selling on the mortgage firms and brokerages as part of a crackdown on stock manipulation. Crude oil, which hit a record of $147.27 a barrel July 11, plunged 11 percent for the week, to $128.88, on signs of a slowing global economy, faltering U.S. fuel demand and rising supplies. Google and Microsoft fell in the week's final session after they reported profit below analysts' estimates, signaling that the slowing economy may be weighing on demand for computer-related products.

Yields on Treasury securities climbed as a government report showed that prices rose more than economists had forecast in June. The benchmark 10-year note's yield increased to 4.09 percent, a three-week high, from 3.96 percent.

The Treasury will auction $24 billion of three-month bills and $23 billion of six-month bills on Monday. They yielded 1.53 percent and 1.95 percent, respectively, in when-issued trading. The Treasury will sell one-month bills Tuesday.

-- Bloomberg News

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