Market heartened by loan to Countrywide
NEW YORK » Stocks rose sharply yesterday, led by strong gains among the blue chips and mortgage lender Countrywide Financial Corp., which said it had lined up added financing.
The Dow Jones industrial average rose by more than 130 points on strong advances by General Motors Corp. and McDonald's Corp., which hit an all-time high. Financial stocks such as Countrywide also jumped, while bond prices fell.
Investors, who have been nervous about the impact of sinking housing and credit markets on the economy, were relieved to hear Countrywide secured $12 billion in credit. The additional financing alleviated concerns the nation's largest mortgage lender might collapse because of spiking defaults.
Also buoying the mood on Wall Street, UAW President Ron Gettelfinger said he may agree to a trust fund for employee health care costs that would be run by the union, the Wall Street Journal reported. GM, which Citigroup upgraded to a "Buy" from a "Sell," jumped sharply on the news; Ford Motor Co. also advanced.
"It appears that this credit crunch may not be as bad as some people thought," said Charles Norton, principal at GNICapital.
The Dow rose 133.23, or 1.00 percent, to 13,424.88.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 12.39, or 0.84 percent, to 1,483.95, and the technology-heavy Nasdaq composite index rose 8.99, or 0.35 percent, to 2,601.06. The Russell 2000 index of smaller companies rose 2.45, or 0.31 percent, 780.35.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to a light 1.27 billion shares compared with volume of 1.29 billion traded Wednesday.
Government bond prices fell sharply as stocks advanced and investors grew more confident they could move out of the safest bets. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.48 percent from 4.41 percent Wednesday.
Wall Street seemed to shrug off a record close in crude oil prices, which edged up 18 cents to $80.09 a barrel on the New York Mercantile Exchange. It was the first time oil closed above $80.
Economic news lifted investor sentiment as well. The U.S. Labor Department reported claims for unemployment benefits rose by 4,000 last week to 319,000 -- the sixth increase in seven weeks -- but less than the 325,000 claims analysts expected. Low unemployment has been one of the economy's strengths.
Countrywide rose $2.31, or 14 percent, to $18.93 after the company added to its borrowing capacity. The move comes after Countrywide borrowed $11.5 billion and sold a $2 billion stake to Bank of America in recent weeks to keep its retail banking and mortgage businesses running.
Wall Street also applauded apparent progress in Detroit over health care costs for autoworkers. GM rose $3.04, or 10.1 percent, to $33.29, while Ford rose 42 cents, or 5.6 percent, to $7.92.
McDonald's advanced $3.10, or 6.1 percent, to $54.30 after increasing its dividend 50 percent a day after reporting stronger-than-expected sales for August.