Wall Street finished mostly higher today after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some...
NEW YORK — Wall Street finished mostly higher today after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some of the market’s concerns about further deterioration in the credit markets.
The Dow Jones industrials rose 133.40 to 12,373.41. The blue-chip index was up more than 200 points earlier in the session.
Microsoft, one of the 30 Dow stocks, added 13 cents to close at $28.34 a share. Boeing, also a Dow stock, gained $2.43 to $83.56.
Broader stock indicators were mixed. The Standard & Poor’s 500 index advanced 9.73 to 1,348.86, and the Nasdaq composite index edged down 0.02 to 2,320.04.
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In an interview on CNBC, Buffett said his Berkshire Hathaway holding company has offered a second level of insurance on up to $800 billion in municipal bonds. The reinsurance offer is for bond insurers Ambac Financial, MBIA and Financial Guaranty Insurance Co., known as FGIC.
Word of the offer gave some investors relief although Buffett says a deal would back only municipal bonds, and not the risky and complicated financial instruments that many see as more likely to have problems. Still, further assurances on the soundness of municipal bonds could help shore up Wall Street’s confidence and reinforce the differences in quality among various levels of debt.
General Motors appeared to please investors with a fresh round of buyouts to all 74,000 of its U.S. hourly workers represented by the United Auto Workers. The company also reported a loss of $38.7 billion in 2007, the largest annual loss for an automotive company. GM shares fell 52 cents to $26.60.
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said Buffett’s move gives the market a bit of needed confidence.
“It’s a good thing to see,” he said. He also agreed with Buffett’s assessment that stocks are mostly fairly valued. “We could definitely test some more lows going forward but there was a pretty good drop-off there again and I think people are trying to take advantage of it to get some quality stocks at cheaper prices.”
But some analysts were cautious.
Investors should be careful not to read too much into the market’s advance, said Len Blum, managing director of Westwood Capital. He noted that recent readings on U.S. retail spending show that Americans are hurting financially.
“Stock markets will have good days in bear markets,” he said, adding that he believes more problems will be uncovered in the financial sector. “We haven’t seen all the losses. Even if you have some investors willing to bottom fish, or very sophisticated investors like Warren Buffett willing to invest at this point, the financial sector is still really sick.”
Buffett’s overture to the big bond insurers reassured investors. Buffett said one firm rejected his offer and he is still waiting to hear from the other two.
Bond insurers write policies that promise to cover payments to bondholders if the entity that issued the bonds defaults. Reinsurance provides a second level of insurance on those bonds.
Investors also appeared pleased by a government plan called Project Lifeline involving the six largest mortgage lenders to help at-risk borrowers with all types of mortgages retain their homes.
And adding to investors’ more upbeat mood, Credit Suisse Group sharply reduced its estimate of how much exposure it has to subprime mortgage debt. Switzerland’s second largest bank said its debt tied to subprime mortgages, those given to borrowers with poor credit, fell to 1.6 billion francs ($1.45 billion) from 3.9 billion francs at the end of September. Its fourth-quarter net profit fell 72 percent because of write-downs. The stock rose $1.17 to $52.
Diversified manufacturer 3M said late Monday it would pay a quarterly dividend of 50 cents, an increase of 4.2 percent over its previous payout. The decision by 3M, which makes products such as Scotch tape and Post-it notes, to boost its dividend is welcome news for investors amid a time of economic uncertainty. 3M fell 18 cents to $79.10.