Bear’s revision, home sales boost stocks
NEW YORK » Wall Street extended its big advance yesterday as investors applauded a new agreement that will give Bear Stearns Cos. shareholders five times the payout that was set in a JPMorgan Chase & Co. buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report, and sent the Dow Jones industrial average up nearly 190 points while also selling bonds sharply lower.
JPMorgan boosted investors' optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Bear Stearns shares jumped $5.29, or 89 percent, to $11.25, while JPMorgan rose 58 cents to $46.55.
"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,' " said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.
The housing sector, which has offered a steady drumbeat of mostly negative news in recent months, gave investors a welcome lift. The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and Wall Street had expected a slight decline. Still, the median home price fell by the largest amount on record.
The Dow rose 187.32, or 1.52 percent, to 12,548.64, after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 20.37, or 1.53 percent, to 1,349.88, and the Nasdaq composite index rose 68.64, or 3.04 percent, to 2,326.75. The Russell 2000 index of smaller companies rose 19.86, or 2.91 percent, to 701.28.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to 4.37 billion shares, down from 6.12 billion on Thursday. Many traders took the day off as part of an extended weekend.
Yesterday's gains followed a volatile but ultimately strong week for the markets. The Dow and the S&P each showed gains of more than 3 percent for the week, while the Nasdaq advanced more than 2 percent.
Bond prices fell sharply as investors felt less of a need for the safety of government bonds, and also rushed to join the stock market rally. The yield on the benchmark 10-year Treasury note, which moves opposite its price, shot up to 3.53 percent from 3.34 percent late Thursday, a huge advance that reflected the shift in market sentiment.
The 10-year Treasury's yield moved up to 3.55 percent in after-hours trading.
Meanwhile, the dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell 98 cents to settle at $100.86 per barrel on the New York Mercantile Exchange.
Beyond the banks and housing, a report from Tiffany & Co. helped assuage some concerns about the health of high-end consumers. The jeweler said loans it made to a diamond company weighed on its fourth-quarter profit, but that earnings excluding items were in line with Wall Street's expectations. Tiffany jumped $4.05, or 10.5 percent, to $42.65.