Good news sends stocks soaring
NEW YORK – Wall Street shot higher Tuesday, lifting the Dow Jones industrials nearly 320 points after reassuring news from Goldman Sachs Group Inc. and Wal-Mart Stores Inc. quelled some of the market’s worst fears about the credit crisis and the economy. A plunge in the price of oil gave investors further incentive to buy.
Goldman Sachs heartened investors with word that it didn’t expect a significant hit from the subprime mortgage turmoil. Goldman Chief Executive Lloyd Blankfein, speaking at a conference held by Merrill Lynch & Co., said the bank has a short position in the subprime mortgage market and won’t be taking any significant charges to write off losses.
Goldman’s news helped offset an announcement from Bank of America Corp., which joined other big financial companies including Citigroup Inc. and Merrill Lynch that have recently revealed heavy writedowns from soured mortgages; BofA said it will record $3 billion in pretax writedowns in the fourth quarter.
Goldman’s assessment was the first substantial good news from the financial services industry about a company’s credit exposure, and was comforting to investors whose fears about widening credit problems have sent Wall Street plunging over the past month.
“People just want to know what’s out there,” said Todd Leone, managing director of equity trading at Cowen & Co. “They want to feel like they’re being told the truth.”
A sharp pullback in energy prices also encouraged Wall Street. Oil prices plummeted after the International Energy Agency reduced its expectations for demand in the fourth quarter and next year and said crude supplies are growing. Light, sweet crude for December delivery fell $3.45 to settle at $91.17 a barrel on the New York Mercantile Exchange.
The Dow rose 319.54, or 2.46 percent, to 13,307.09.
A day earlier, a turbulent session pushed the Dow below 13,000 for the first time since August. Tuesday’s advance snapped a four-day losing streak for the blue chip index.
Broader indexes also rose sharply Tuesday. The Standard & Poor’s 500 index jumped 41.86, or 2.91 percent, to 1,481.04, and the Nasdaq composite index gained 89.52, or 3.46 percent, to 2,673.65.
News in the troubled housing market was mixed Tuesday, but didn’t spoil Wall Street’s rally. The National Association of Realtors said its index for pending home sales edged higher in September at a seasonally adjusted annual rate of 0.2 percent to 85.7 from 85.5 in August. It was the first increase since June. However, the trade group said it expects the market slump to worsen into 2008.
Overseas, Japan’s Nikkei stock average fell 0.46 percent and Hong Kong’s Hang Seng index rose 0.50 percent. In Europe, Britain’s FTSE 100 rose 0.39 percent, Germany’s DAX index fell 0.38 percent, while France’s CAC-40 added 0.06 percent.