US stocks: GM shares surge

NEW YORK - US stocks rose sharply on Wednesday, as a buying spree was sparked by billionaire Kirk Kerkorian's offer to more than double his stake in struggling automaker General Motors Corp., sending its shares up 18.1 per cent. 

The move breathed life into the troubled automotive sector and prompted a broad-based rally as investors were buoyed with optimism that there was value in other beaten-down stocks.  

The Dow and S&P 500 indexes closed at their highest level in three weeks.  

Kerkorian "has injected some new spirit at least into the auto sector," said Ned Riley, chief executive and chief investment officer at Riley Asset Management.  

"This shows that there is value in the market place. It demonstrates a willingness of buyers to come in and buy some very cheap assets and sends a conformation that stocks are basically cheap and that investors are missing the forest for the trees. "  

The Dow Jones industrial average ended up 127.69 points, or 1.24 per cent, at 10,384.64. The Standard & Poor's 500 Index rose 14.48 points, or 1.25 per cent, to 1,175.65. The Nasdaq Composite Index finished up 29.16 points, or 1.51 per cent, at 1,962.23.  

General Motors surged US$5.03 to US$32.80 after Kerkorian offered to raise his stake to 8.8 per cent. The world's biggest automaker was also helped by an upgrade by Merrill Lynch to "neutral" from "sell."  

The GM news lifted US auto parts makers such as Visteon Corp., which rose 16 per cent, or 54 cents to US$3.94, and Delphi Corp., up 12.6 per cent, or 43 cents at US$3.85.  

It also helped other cyclical stocks, sensitive to economic ups and downs, like construction machinery maker Caterpillar Inc., which rose 2 per cent, or US$1.84 to US$89.42, and appliance maker Maytag Corp., up 3 per cent to US$10.27.  

After the closing bell, shares of International Business Machines Corp., the world's largest computer company, rose 1 per cent, or 81 cents to US$77.89 after it said it would cut up to 13,000 jobs as part a global cost-cutting plan. 

During the regular session, investors digested Tuesday's move by the Federal Reserve to nudge interest rates higher for the eighth straight time. That caused a small rebound in stocks late on Tuesday when the Fed released a second statement saying inflation remained well-contained.  

Also in focus was longer-dated Treasury debt, which plummeted after the government startled investors by saying they were considering resuming issuance of 30-year bonds.  

Riley thought that could be good news for stocks, saying it "reduces what I consider an open end interest cost for the US government".  

Meanwhile, markets largely shrugged off a reversal in the price of oil, which rebounded, erasing an earlier loss. Crude for June delivery settled 63 cents higher at US$50.13.  

Among stocks gaining, media conglomerate Time Warner Inc. rose 4 per cent, or 60 cents to US$17.28 after posting a moderate rise in quarterly profit.  

Aon Corp. soared 15 per cent, or US$3.18 to US$24.45. The world's No. 2 insurance broker said first-quarter profit easily exceeded Wall Street forecasts, and a Merrill Lynch & Co. analyst raised his rating on the company. 

Insurer MetLife Inc. also helped, rising 12.1 per cent, or US$4.71 to US$43.55 a day after it beat Wall Street expectations with a 65 per cent rise in quarterly profit.  

Among decliners, Electronic Arts Inc., the world's largest video game publisher, fell 6.5 per cent, or US$3.45 to US$49.45 a day after it reported a sharply lower profit. 

Trading was heavy, with 1.8 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.93 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.  

Advancers outnumbered decliners on the New York Stock Exchange by about 3-to-1 and by about 7-to-3 on Nasdaq.  

- REUTERS