UBS and Lehman news boosts stocks
NEW YORK » Wall Street began the second quarter with a big rally yesterday as investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected. The Dow Jones industrials surged nearly 400 points, and all the major indexes were up more than 3 percent.
Financial stocks were among the big winners after Lehman Brothers Holdings Inc. and Switzerland's UBS AG issued new shares to help bolster their balance sheets. UBS surged $4.21, or 14.6 percent, to $33.01 in trading on the New York Stock Exchange. Lehman rose $6.70, or 17.8 percent, to $44.34.
With that upbeat news and a fresh quarter ahead of them, investors appear quite willing to make some bets that the worst of the damage from the nation's credit struggles has been felt. Moreover, the banks' moves buttressed the view that financial services companies are taking aggressive action to improve their capital bases.
"Investors have a difficult time making decisions about the stock market if they don't have confidence in major financial institutions, so there's been a lot of sideline cash," said Richard Cripps, chief market strategist for Stifel Nicolaus. "The extreme conditions that we've seen here over the past few months has been missing that confidence ... but that appears to be changing, and we're seeing the response."
Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 -- indicating a contraction, but a slower one than in February and tamer than many analysts had predicted.
The Dow rose 391.47, or 3.19 percent, to 12,654.36. It marked the eighth-biggest point gain ever for the Dow, and the third time in two weeks it came close to or surpassed 400 points.
Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 47.48, or 3.59 percent, to 1,370.18 -- the index's best start to a second quarter since 1938. And, the Nasdaq composite index rose 83.65, or 3.67 percent, to 2,362.75. The Russell 2000 index of smaller companies rose 22.68, or 3.30 percent, to 710.65.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 4.65 billion shares, compared to 4.02 billion on Monday.
Renewed enthusiasm that the credit crisis might be waning was also felt in the Treasury market, where government securities fell as investors withdrew money to take bets on stocks. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.55 percent from 3.43 percent late Monday. The yield edged up to 3.56 percent in after-hours trading.
In addition to hopes about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the euro. The euro fell to $1.5596 from $1.5785 late Monday in New York.
And there was also optimism that commodities prices, which have hit historic highs in recent months, have begun to retreat. Crude fell 60 cents to settle at $100.98 on the New York Mercantile Exchange after earlier falling below $100. Meanwhile, gold dropped back below $900 an ounce.