Buffett bond offer gives stocks boost
NEW YORK » Wall Street finished mostly higher yesterday after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some of the market's concerns about further deterioration in the credit markets.
In an interview on CNBC, Buffett said his Berkshire Hathaway Inc. holding company has offered a second level of insurance on up to $800 billion in municipal bonds. The reinsurance offer is for bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co., known as FGIC.
Word of the offer gave some investors relief although Buffett said a deal would only back municipal bonds, and not the risky and complicated financial instruments that many see as more likely to have problems.
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said Buffett's move gives the market a bit of needed confidence.
"It's a good thing to see," he said. He also agreed with Buffett's assessment that stocks are mostly fairly valued.
But Len Blum, managing director of Westwood Capital, noted that recent readings on U.S. retail spending show that Americans are still hurting financially.
"We haven't seen all the losses," he said. "Even if you have some investors willing to bottom fish, or very sophisticated investors like Warren Buffet willing to invest at this point, the financial sector is still really sick."
The Dow rose 133.40, or 1.09 percent, to 12,373.41. The blue chip index was up more than 200 points earlier in the session. The Standard & Poor's 500 index advanced 9.73, or 0.73 percent, to 1,348.86. The Russell 2000 index of smaller companies rose 5.73, or 0.82 percent, to 705.48.
However, the Nasdaq composite index edged down 0.02, or less than 0.01 percent, to 2,320.04.
Tech stocks fell in the last hour of trading amid uncertainty about Microsoft Corp.'s bid to acquire Yahoo Inc. -- an overture that could eventually go hostile. In addition, Research In Motion Ltd. fell after its Blackberry e-mail system had an outage.
Yahoo fell 30 cents to $29.57 while Microsoft rose 13 cents to $28.34. Research In Motion shares fell $2.97, or 3.1 percent, to $91.50.
Advancing issues outnumbered decliners by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.92 billion shares from 3.51 billion.
Bond prices fell yesterday after Buffett's announcement. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.63 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 81 cents to settle at $92.78 a barrel on the New York Mercantile Exchange.
General Motors Corp. fell 52 cents to $26.60 after announcing a fresh round of buyouts to all 74,000 of its U.S. hourly workers represented by the United Auto Workers. The company also reported losses of $38.7 billion in 2007, the largest annual loss for an automotive company.