Stocks Have Best Week Of 2009

By Renae Merle
Washington Post Staff Writer
Saturday, March 14, 2009

Investors clung to modest gains yesterday, handing Wall Street its best week since November as there arose small signs that some parts of the economy aren't suffering as much as initially feared.

The four-day winning streak defied expectations that stocks were experiencing a brief rally that would soon be followed by another major sell-off -- a prospect some analysts still consider likely. The battered financial sector led this week's rebound, as the share prices of several banks rose sharply, including Bank of America and Wells Fargo, which were up 83 percent and 62 percent, respectively.

After swinging between negative and positive territory all day yesterday, the Dow Jones industrial average closed up 53.92 points, or 0.8 percent, at 7223.98. The Standard & Poor's 500-stock index gained 5.81, or 0.8 percent, to 756.55, while the tech-heavy Nasdaq composite index gained 5.40, or 0.4 percent, to 1431.50.

The Dow rose 9 percent this week, while the S&P 500 and Nasdaq each gained about 11 percent.

Investor fears had driven stocks to 12-year lows, but some traders became convinced the sell-off had gone too far, analysts said. That helped buoy stocks, along with nuggets of relatively positive economic data -- retail sales didn't fall as much as expected, for example -- and signs that federal regulators could make business-friendly changes to accounting and trading rules.

Demand remains high for government bonds and gold, traditional safe havens during market turmoil, analysts said, but many traders were ready for a break from the bleak assessments that weighed stocks down. "People seem more willing to take some risks," said Jack Caffrey, managing director and equity strategist for J.P. Morgan Chase.

That optimistic outlook was reinforced yesterday when Lawrence H. Summers, director of the National Economic Council, said consumer spending appears to have "stabilized." General Motors surged another 25 percent yesterday, to $2.72 a share, after saying earlier this week that it would not need its next installment of government aid as quickly as initially expected. It was by far the biggest gainer yesterday among the Dow's 30 blue-chip stocks, and for the week it rose 88 percent.

Wall Street's focus this week was the financial sector. On Tuesday, Citigroup said it had turned a profit during the first two months of the year, helping spur the rally.

Those gains were extended yesterday after reports that the company's chairman, Richard D. Parsons, said he does not expect his troubled bank to need additional government aid. Citigroup's stock climbed 7 percent yesterday, to $1.78 a share, giving it a gain of 73 percent for the week.

But, in a reflection of the challenges facing the banking sector, Citigroup is still down 73 percent from the beginning of the year, when it traded at more than $6 a share.

Investors remained anxious about some parts of the financial services industry. Discover Financial Services and Capital One, two large credit card companies, tumbled 6 percent yesterday. Analysts have become concerned that the credit card industry will face increasing defaults and delinquencies.

And there was more evidence of the global recession in trade figures released yesterday by the Commerce Department. The U.S. trade deficit fell to $36 billion in January, its lowest level since 2002, as the recession sapped demand for imported goods.

The data reflect not only slower consumer spending, but also business cutbacks, including reductions in many high-tech purchases, said Nigel Gault, chief U.S. economist for IHS Global Insight. "It is still an economy, not just in the U.S. but globally, that is contracting very sharply," Gault said. The "key takeaway from January's trade report is not that the deficit narrowed, but that world trade activity continues to plunge."

Crude oil prices, which surged Thursday, fell 2 percent yesterday to $46.25 a barrel on the New York Mercantile Exchange after Credit Suisse lowered its outlook for crude oil prices from $60 a barrel to $50 a barrel this year and from $80 a barrel next year to $60. That sent energy stocks down. ConocoPhillips fell 3 percent and Chevron was down about 1 percent.

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