Subprime lender woes fail to dampen trading
NEW YORK » Wall Street's recovery from last month's plunge gained momentum yesterday, with stocks rising as investors looked past widening cracks in the subprime lending sector and bought in response to another parade of acquisition deals.
New Century Financial Corp.'s warning that its lenders had suspended financing initially overshadowed acquisition news involving companies such as Dollar General Corp. and Schering-Plough Inc.
The Dow Jones industrial average rose 42.30, or 0.34 percent, to 12,318.62.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 3.75, or 0.27 percent, to 1,406.60, and the Nasdaq composite index rose 14.74, or 0.62 percent, to 2,402.29.
The Russell 2000 index of smaller companies rose 3.88, or 0.49 percent, to 789.00.
Advancing issues outnumbered decliners by about 2 to 1 on the NYSE, where volume came to 2.62 billion shares, compared with 2.59 billion shares billion Friday.
Bonds rose amid concerns about subprime lenders; the yield on the benchmark 10-year Treasury note fell to 4.56 percent from 4.59 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude settled down $1.14 to $58.91 per barrel on the New York Mercantile Exchange.
The day's buyout news offered support for stocks amid the din over subprime lenders. The concerns about the subprime sector followed a relatively successful week on Wall Street. Stocks etched out gains last week U.S. and overseas markets managed to regain some sense of stability following the sharp pullback late last month. Concerns about subprime lenders still weighed on investors.
New Century Financial Corp. warned yesterday in a filing with the Securities and Exchange Commission that all its lenders had cut off short-term funding or announced plans to do so after the subprime mortgage lender wasn't able to make payments. New Century, which relies on short-term borrowings to finance mortgage loan originations and purchases, said it would need about $8.4 billion should it be forced to repurchase all outstanding mortgage loans.
Trading in New Century shares remained halted with news pending for the entire session yesterday. The New York Stock Exchange said it is reviewing the listing status of New Century shares.
Other subprime lenders dropped sharply. Fremont General fell $1.30, or 16.2 percent, to $6.73, while Novastar Financial Inc. fell $1, or 19.1 percent, to $4.24.
In other corporate news, word that private-equity company Kohlberg Kravis Roberts & Co. struck a deal to acquire Dollar General for about $6.87 billion sent the discount retailer sharply higher. Dollar General jumped $4.29, or 25.6 percent, to $21.07.
Schering-Plough rose 10 cents to $23.95 after agreeing to purchase the Organon BioSciences BV pharmaceuticals business of Akzo Nobel NV, the Dutch maker of chemicals and coatings, for $14.5 billion. Akzo climbed $10.02, or 16.5 percent, to $70.83.