Wall Street turned higher today as oil prices dropped sharply for the second straight day and investors were encouraged by the possibility...
NEW YORK — Wall Street turned higher today as oil prices dropped sharply for the second straight day and investors were encouraged by the possibility of more help for the ailing financial system.
The Dow Jones industrial average closed up 152.25 at 11,384.21, after moving in and out of positive territory during the trading session.
Microsoft, one of the 30 Dow stocks, fell 18 cents to close at $25.85 a share. Boeing, also a Dow stock, gained $1.63 to $65.92.
Broader stock indicators rose as well. The Standard & Poor’s 500 index rose 21.39 to 1,273.70, while the Nasdaq composite index rose 51.10 to 2,294.42.
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Crude prices tumbled, falling $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange, bringing oil’s two-day drop to more than $9. The average U.S. retail price of a gallon of gasoline remains at a record $4.108, according to AAA auto club, the Oil Price Information Service and Wright Express.
Speeches by Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and JPMorgan Chase Chief Executive Jamie Dimon gave the market some reassurance. Investors have been concerned this week about the health of government-backed lenders Fannie Mae and Freddie Mac; the two companies’ troubles helped send prices lower on Monday, but they also helped lead the rebound today.
The market was relieved to hear Bernanke say in a speech that the central bank might extend its lending efforts to investment banks; the Fed began allowing the big companies to borrow after the near-collapse of Bear Stearns earlier this year. At the Federal Deposit Insurance Corp.’s forum on mortgage lending, where Bernanke spoke, Dimon said, “The future is very, very bright,” but that, “I do think we have some very serious issues to face.”
All that helped stocks stage a late-afternoon rebound after choppy trading throughout most of the session.
“A lot of money is flowing into the previous laggards,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, pointing to financials, health, and housing stocks. “It really seems like an oversold bounce.”
Bond prices edged higher today. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 3.91 percent late Monday.
The dollar rose against other major currencies, while gold prices fell.
The Dow finished an erratic session Monday with a moderate loss, putting the blue-chip index in bear market territory. A bear market is traditionally defined as a drop of 20 percent from the last peak.
Meanwhile, the National Association of Realtors said today that pending sales of U.S. homes fell by 4.7 percent in May from the previous month. The worsening housing market not only stifles consumer spending, but also hurts the chances of a recovery at the banks that make loans and are invested in risky mortgage debt.
Fannie Mae and Freddie Mac bounced higher after closing at their lowest levels a decade during the prior session over fears that they may need to raise fresh capital to remain in business. Both would need the money if a new accounting rule is enacted that would force them to put investments used as a main revenue driver off their balance sheets.
However, comments from both Bernanke and Paulson calmed market jitters about the two mortgage lenders. Shares of Fannie Mae rose $2.08, or 13.4 percent, to $17.83; and Freddie Mac jumped $1.94, or 13.4 percent, to $13.86. On Monday, Fannie declined 16 percent and Freddie slumped 18 percent.