Wall Street draws hope from forecast end to write-downs
NEW YORK » A fractious Wall Street rebounded from an early plunge to finish moderately higher yesterday, after Standard & Poor's predicted financial companies are nearing the end of the massive asset write-downs that have devastated the stock and credit markets.
The S&P projection gave investors some hope that the seemingly unrelenting losses from the mortgage and credit crisis might indeed be bottoming out. Standard & Poor's Ratings Services said it estimates writedowns of subprime asset-backed securities could reach $285 billion globally, up from its previous projection of $265 billion, but added that "the end of write-downs is now in sight for large financial institutions."
"The S&P comment was a positive for the market because investors were relieved to think that the subprime problem may be behind us," said Al Goldman, chief market strategist at A.G. Edwards.
Kim Caughey, equity research analyst at Fort Pitt Capital Group, said that while she is a market bull, it's possible investors extrapolated a bit too much good news from the S&P report. "I would rather see fewer foreclosures and housing prices bottoming out to decide that the credit crisis is drawing to a close," she said.
The S&P's note arrived on the heels of a spate of troubling news. A Carlyle Group fund warned late Wednesday it expects creditors will seize all the fund's remaining assets after unsuccessful negotiations to prevent its liquidation. Meanwhile, the government reported yesterday an unexpected dip in retail sales, and a research firm said nearly 60 percent more U.S. homes faced foreclosure in February than in the same month last year.
The Dow Jones industrial average finished up 35.50, or 0.29 percent, at 12,145.74, after being down more than 220 points early in the session and then popping up more than 100.
Broader market indexes also recovered from steep early losses. The S&P 500 index rose 6.71, or 0.51 percent, to 1,315.48, while the Nasdaq composite index rose 19.74, or 0.88 percent, at 2,263.61. The Russell 2000 index of smaller companies rose 12.40, or 1.86 percent, to 679.71.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where consolidated volume came to 4.94 billion shares, up from 4.27 billion Wednesday.
Bond prices fell as stocks rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.54 percent from 3.44 percent late Wednesday.
As investors contend with tight credit markets, they also face weakness in the U.S. dollar and soaring commodities prices. The dollar dropped to fresh lows against the euro and fell below 100 yen during Asian trading yesterday, the weakest level for the greenback against the Japanese currency in
12 years. Gold surpassed the psychological benchmark of $1,000 an ounce for the first time, and crude oil briefly passed $111 a barrel.
Light, sweet crude rose
41 cents to settle at a record $110.33 on the New York Mercantile Exchange.
The Fed's Open Markets Committee meets next Tuesday and is widely expected to lower interest rates, with many analysts forecasting a drop of 0.50 percentage point.