Stocks rise on possible sale of Countrywide
NEW YORK » A volatile Wall Street advanced yesterday for the second day in a row, as investors found renewed confidence in a report that Bank of America Corp. is close to buying struggling mortgage lender Countrywide Financial Corp.
After seesawing earlier in the day, the Dow Jones industrials finished up nearly 120 points on the afternoon report from the Wall Street Journal. The stock market has been buffeted by concerns about fallout from the mortgage and credit crisis. Countrywide's problems with delinquent and defaulting loans have sent stocks falling even in recent days.
"For the last month, rumors are that Countrywide was going into bankruptcy," said Ryan Larson, senior trader at Voyageur Asset Management. "Any deal with Bank of America is good news, and the market is looking for even a hint of good news these days."
Credit concerns were one reason the market waffled in earlier trading, with investors trying to reconcile comments on the economy from Federal Reserve Chairman Ben Ber-nanke and Kansas City Fed President Thomas Hoenig.
Stocks jumped after Bernanke said the Fed was ready to lower interest rates again when it meets Jan. 29-30 to ward off a recession. But the market bobbled up and down before turning narrowly mixed after Hoenig said later that inflation remains a concern and the stock market is "not the center of our attention."
Furthermore, Wall Street is worried that it will take a lot more than rate cuts to restore economic momentum.
The Dow Jones industrial average rose 117.78, or 0.92 percent, to 12,853.09.
Broader stock indicators also rebounded. The Standard & Poor's 500 index rose 11.20, or 0.79 percent, to 1,420.33, while the technology-heavy Nasdaq composite index rose 13.97, or 0.56 percent, to 2,488.52.
The Russell 2000 index of smaller companies rose 8.09, or 1.14 percent, to 720.21.
Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 2.06 billion shares.
The dollar fell against other major currencies.
Gold rose to another record on the New York Mercantile Exchange, while crude oil fell $1.96 to $93.71 a barrel.
Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.90 percent in late afternoon trading, up from 3.83 percent late Wednesday.
The weakest sector over last few quarters has been the financial sector, which is why the possible buy of Countrywide by Bank of America -- which invested $2 billion in the lender back in August -- came as a relief, suggesting to investors that some banks are strong enough to come to the aid of others. Countrywide surged $2.63, or 51.3 percent, to $7.75, and Bank of America rose 56 cents to $39.30.
But Capital One Financial Corp. said yesterday it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion in charge-offs.
The announcement confirmed fears of some analysts that the erosion of the subprime mortgage market has hurt other credit classes. Capital One fell 43 cents to $42.92.