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NEW YORK - US stocks jumped on Thursday, capping a tumultuous week, on optimism that giving Fannie Mae and Freddie Mac a bigger role in the mortgage market will ease a credit crunch that claimed Bear Stearns as its biggest victim.
Stocks closed out their best week in
nearly two months on the strength of financial shares, which bore the brunt of investors' wrath since the credit crisis unfolded last summer. The benchmark Standard & Poor's 500 gained 2.4 per cent for the day and rose 3.2 per cent for the week.
Fannie Mae and Freddie Mac delivered eye-popping gains for a third session, each rising more than 50 per cent since Monday. Meanwhile, major banks such as Bank of America, JPMorgan and Citigroup rose between 8 per cent and 10 per cent each on Thursday, while the Dow Jones index of home building stocks soared 8.3 per cent.
Industrial heavyweight General Electric helped lead the Dow higher with a 5.3 per cent gain to $37.49 after Merrill Lynch raised its rating on the stock as a safe bet in a slowing economy.
A second day of plunging oil and gold prices helped ease fears of inflation getting out of control, spurring gains across the board. Energy-sensitive sectors such as airlines and consumer discretionary companies gained about 3 per cent.
Financial "stocks are moving inversely to what's been going on in the commodities markets with commodities prices falling in the last couple of days," said Matt Kaufler, portfolio manager and equity analyst at Clover Capital Management, in Rochester, New York.
"And the overarching assumption to all of this being that the worst of it is likely behind us."
The Dow Jones industrial average gained 261.66 points, or 2.16 per cent, to 12,361.32. The Standard & Poor's 500 Index climbed 31.09 points, or 2.39 per cent, to 1,329.51. The Nasdaq Composite Index rose 48.15 points, or 2.18 per cent, to 2,258.11.
Fannie Mae rose 11.7 per cent to $34.30, while Freddie Mac climbed 9 per cent to $32.58 after Keefe, Bruyette & Woods upgraded them, saying recent government actions will help the mortgage giants in stabilizing the ailing housing market.
Crude oil , fell 70 cents to $101.84 a barrel, after earlier sliding to a session low below $99 a barrel. That pullback in oil prices alleviated worries about the effect of high energy costs on consumers and businesses.
Shares of Wal-Mart Stores Inc, the world's largest retailer, rose 4.8 per cent to $53.23.
Stocks had rallied early in the day after a survey from the Philadelphia Federal Reserve Bank showed factory activity in the US Mid-Atlantic region shrinking for the fourth consecutive month in March, but by slightly less than the median forecast.
Helping the Nasdaq were shares of Intel Corp, up 3.1 per cent to $21.75 after the chip maker raised its quarterly dividend by 10 per cent, while Apple Inc rose 2.8 per cent to $133.27.
Shares of Nike Inc jumped 8.8 per cent to $67.27 after the company posted a third-quarter profit that handily beat estimates.
Markets will be closed for Good Friday. The US bond market closed early on Thursday.
Trading was extremely heavy on the New York Stock Exchange, with about 2.77 billion shares changing hands, well above last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.68 billion shares traded, above last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 3 to 1 and by about 2 to 1 on Nasdaq. (Editing by Jan Paschal)
- REUTERS