Bear Stearns and GM news gives stocks lift
NEW YORK » Stocks rose soundly yesterday 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 word 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." 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 yesterday 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 yesterday despite lackluster economic data, but not before hitting another record low against the euro. Gold prices fell.
Light, sweet crude settled at $80.30 per barrel on the New York Mercantile Exchange.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.29 billion shares compared with 1.33 billion shares traded Tuesday.
In corporate news, GM jumped $3.22, or 9.4 percent, to $37.64 after workers agreed to return to their jobs after a two-day nationwide strike. The deal would allow GM, which was by far the biggest advancer among the Dow stocks, to have the union oversee management of retiree health care.
Bear Stearns doubled its gains after the New York Times reported Buffett, among others, had shown interest in a minority stake in the company. The stock finished up $8.76, or 7.7 percent, at $123.
Technology stocks showed gains Wednesday after Red Hat Inc., a maker of open-source software, reported its fiscal second-quarter profit rose sharply and that its revenue came in ahead of Wall Street's expectations. Red Hat advanced $1, or 5.3 percent, to $19.89.