GM, Bear Stearns boost market
Stocks rose soundly Wednesday following word that some of the problems dogging big companies like General Motors Corp. and Bear Stearns Cos. could be on the mend.
GM, one of the 30 stocks that makes up the Dow Jones industrial average, led the market higher from the outset with news it had struck a tentative contract agreement with the United Auto Workers that could allow the company to shed some of its burdensome health care costs.
While stocks held onto gains throughout the session, rumors that Bear Stearns Cos. would sell a stake in the company took on new urgency in the final hour of trading with a report that billionaire investor Warren Buffett was a potential suitor.
“Certainly it’s good to have problems that have been overhanging Bear Stearns off the table, if that can be done. That should help the financials,” said William Rutherford, president of Rutherford Investment Management in Portland, Ore., referring to the recent failure of two Bear Stearns hedge funds.
“It takes a lot of risk out of Bear Stearns stock. It doesn’t mean that the fears that investors had yesterday were misplaced. It just means there is a new piece of information to be considered,” he said of any interest Buffett might show.
The GM and Bear Stearns news lifted investor sentiment, sending the Dow up 99.50, or 0.72 percent, to 13,878.15.
Broader stock indicators also rose. The Standard & Poor’s 500 index advanced 8.21, or 0.54 percent, to 1,525.42, and the Nasdaq composite index increased 15.58, or 0.58 percent, to 2,699.03.
The Russell 2000 index of smaller companies rose 6.12, or 0.76 percent, to 809.12.
Treasury prices turned higher Wednesday after there was surprisingly strong investor demand in a government sale of $18 billion in new 2-year Treasurys. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.62 percent from 4.64 percent late Tuesday.
The dollar recovered slightly against major currencies Wednesday despite lackluster economic data, but not before hitting another record low against the euro. Gold prices fell.
Oil futures ended higher Wednesday, closing above $80 a barrel as a turbulent day ended with a late rally led by investors who saw an early price dip as a buying opportunity. Light, sweet crude settled at $80.30 per barrel on the New York Mercantile Exchange.
Focusing on developments at companies like GM, Wall Street shrugged off broader economic news from the Commerce Department, which said demand for durable goods fell in August by the largest amount in seven months. The findings could indicate that recent upheavals on Wall Street and in the housing sector dented the economy.
The report followed data released Tuesday showing that existing home sales stalled in August and consumer confidence fell in September.
While on their face troubling, Wall Street often regards such reports as good news because they can be regarded as fresh reason for the Federal Reserve to lower interest rates again when it meets next month. The central bank last week surprised Wall Street with a larger-than-expected half-point cut in rates.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange. Consolidated volume came to 3.16 billion shares, compared with 3.14 billion shares traded Tuesday.
Overseas, Britain’s FTSE 100 rose 0.56 percent, Germany’s DAX index rose 0.45 percent, and France’s CAC-40 rose 0.87 percent. In Asia, Japan’s Nikkei index closed up 0.21 percent and Hong Kong’s Hang Seng Index fell 0.46 percent.