Stocks jump as oil falls sharply to $115
NEW YORK » Wall Street rebounded smartly yesterday, shooting higher as a surge in the dollar and another plunge in oil prices eased some of investors' worries about losses at mortgage finance company Fannie Mae.
The Dow Jones industrials soared more than 300 points, more than wiping out a big loss from the previous session.
Yesterday, the dollar, which has sagged along with the economy, reached its highest level against the euro since February, and in the process sent a wave of confidence through the stock market.
And because the dollar's strength has contributed to the recent skid in oil prices, light, sweet crude dropped sharply again, falling $4.82 a barrel to settle at $115.20 on the New York Mercantile Exchange. That brought crude's decline over the past four weeks to more than $30.
Fresh financial worries surfaced yesterday after Fannie Mae, the largest U.S. buyer and backer of home loans, reported a quarterly loss more than three larger than what Wall Street had expected and said it would slash its quarterly dividend to conserve cash.
The Dow rose 302.89, or 2.65 percent, to 11,734.32.
The blue chips fell nearly 225 points Thursday after concerns about the financial sector, a weak showing by retailers in July and a spike in weekly unemployment claims. But with yesterday's gains, the Dow rose 408 points, or 3.6 percent, for the week.
Broader indicators also rose sharply yesterday. The Standard & Poor's 500 index advanced 30.25, or 2.39 percent, to 1,296.32 and the Nasdaq composite index advanced 58.37, or 2.48 percent, to 2,414.10.
For the week, the S&P gained 2.9 percent, while the technology-heavy Nasdaq jumped 4.5 percent.
Bonds ticked lower as stocks jumped, easing demand for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its prices, rose to 3.94 percent from 3.93 percent late Thursday. Gold prices fell.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to a relatively light 1.25 billion shares compared with 1.28 billion shares traded Thursday.
The Russell 2000 index of smaller companies rose 20.89, or 2.93 percent, to 734.30.
The dollar's rise against the euro came after the European Central Bank and the Bank of England separately left their benchmark interest rates unchanged Thursday. With the ECB signaling more rate hikes aren't likely, the euro wasn't as attractive as an investment.
In economic news, the U.S. Labor Department reported productivity grew at an annual rate of 2.2 percent in the second quarter. Economists surveyed by Thomson/IFR had predicted growth would come in at 2.7 percent compared with 2.6 percent in the first quarter.
Fannie Mae reported a loss of $2.3 billion, or $2.54 a share. Analysts surveyed by Thomson Financial had expected the company to report a loss of 68 cents a share. The company also said it would cut its quarterly dividend to 5 cents from 35 cents. Fannie Mae fell 90 cents, or 9 percent, to $9.05.
While the drop in oil helped stocks in general, certain sectors like the airlines, which have been hit by soaring fuel prices, showed steep gains. United Airlines parent UAL Corp. jumped $1.52, or 16 percent, to $11.13, and Continental Airlines Inc. rose $1.73, or 12 percent, to $16.48.