Stocks shoot higher on Fed credit plan
Updated: 2008-03-12 06:37
Bear Stearns Cos. rebounded from losses to rise 67 cents to $62.97, even after an analyst said the No. 5 U.S. investment bank might need to sell itself, or layoff more staff, to stay afloat. The cost to insure Bear Stearns bonds has been spiking to all-time highs. A spokesman for Bear Stearns didn't immediately return telephone calls.
The central bank's plan basically allows Wall Street's biggest institutions to put up troubled assets as collateral for loans, use the new capital to make money in the market, and then pay back the loan up to 28 days later. Though eventually banks would be forced to take the troubled mortgage-backed debt back on their books, the plan still takes short-term pressure off them. Many of these banks will release first-quarter earnings reports next week.
The Fed's announcement overshadowed a report from the Commerce Department that showed the United States' trade deficit grew larger in January. The latest snapshot of the economy showed that the trade gap increased to $58.2 billion — the highest since November.
The primary reason behind the widening trade deficit is high oil prices. Crude rose as high as $109.72 in premarket trading on the New York Mercantile Exchange before ending at a new settlement record of $108.75. The weak dollar has contributed to oil's rally from $87 a barrel in January.
Gold prices rose, while the dollar edged up against most other major currencies.
The only sector posting major losses Tuesday was healthcare, which has been strong in recent months. WellPoint Inc. fell after Goldman Sachs trimmed its ratings in the managed care sector to neutral from attractive. The investment bank singled out WellPoint's performance amid pricing pressures. The stock plunged $18.66, or 28 percent, to $47.26.
Google Inc. shares spiked after European Union regulators cleared the Internet company's $3.1 billion bid for online ad tracker DoubleClick. Shares of Google rose $26.22, or 6.3 percent, to $439.84.
The Russell 2000 index of smaller companies rose 29.84, or 4.63 percent, to 673.81.
Advancing issues surpassed decliners by more than 5 to 1 on the New York Stock Exchange, where volume came to 1.95 billion shares.
Stocks overseas rebounded. Japan's Nikkei 225 stock average rose 1.01 percent, while Hong Kong's market closed up 1.28 percent higher. Britain's FTSE-100 rose 1.7 percent, Germany was up 2.01 percent, and France added 1.61 percent.
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