Wall St. Cheered by Moves to Contain Crisis
Friday, April 3, 2009
International efforts to tackle the financial crisis and a move to give U.S. banks more leeway when valuing their distressed assets sent the stock market soaring yesterday, pushing prices to their highest level in more than a month.
This extends a rally that began last month as investors embraced signs that the country's economic deterioration could be slowing. The Nasdaq composite index is in positive territory for the year, up 1.6 percent; it has gained 26 percent since it hit its low for the year less than a month ago.
The Dow Jones industrial average traded above 8000 yesterday for the first time since February. The average closed up 2.8 percent, or 216.48 points, at 7978.08. It has bounced nearly 22 percent from its low point earlier this year.
The Standard & Poor's 500-stock index gained 2.9 percent, or 23.30 points, to 834.38, while the tech-heavy Nasdaq climbed 3.3 percent, or 51.03 points, to 1602.63.
Every major sector had gains, including financial and energy stocks, with oil company shares leaping after crude oil prices surged 9 percent, to $52.64 a barrel. Exxon Mobil and Chevron were up 1.5 percent and 2.9 percent, respectively, while ConocoPhillips climbed 4.1 percent.
Market optimism was fed yesterday by several factors, including a government report showing that after six months of declines, factory orders increased 1.8 percent in February, another indication for some analysts that the economy is beginning to stabilize.
It was also helped by international efforts to address the global recession: At the Group of 20 summit, leaders of the world's wealthiest nations announced plans to pour an additional $1 trillion into fighting the downturn. The European Central Bank cut a key interest rate a quarter of a percentage point to a record low 1.25 percent.
That was a smaller cut than expected, but "any kind of action governments worldwide are taking to combat [the economic crisis] is a good thing," said Adam Birzgalis, a market strategist for Lind-Waldock, a Chicago-based trading firm.
The rally has cut into demand for traditionally conservative investment vehicles. Gold prices fell 2 percent, and demand for government bonds waned. "There is a little more faith in the stock market, so there is a little less need for safe-haven markets like the U.S. dollar, as well as gold," Birzgalis said.
Buoying financial stocks was an agreement by the Financial Accounting Standards Board to ease rules on how financial companies value distressed assets. The board adopted new guidelines for mark-to-market accounting rules, which require firms to value certain holdings based on what they would be worth if they sold them now -- not much, given the collapse of the markets.
The change could help boost banks' earnings and reduce their need for capital injections, analysts said. Wells Fargo and PNC Financial Services Group both climbed about 6 percent, while SunTrust Banks was up nearly 7 percent.
That change overshadowed a government report showing that first-time jobless claims increased by 12,000 last week to 669,000 -- the highest level since 1982. That illustrates that despite nuggets of positive economic data recently, the labor market remains weak.
It also precedes the government's March unemployment report, due out today. Economists expect it to show that the country shed about 650,000 jobs last month and that the unemployment rate rose to 8.5 percent from 8.1 percent in February.