Wall Street snapped back today after its biggest sell-off in years amid growing expectations that lawmakers will salvage a $700 billion...
NEW YORK — Wall Street snapped back today after its biggest sell-off in years amid growing expectations that lawmakers will salvage a $700 billion rescue plan for the financial sector. But the seized-up credit markets where businesses turn to raise money showed no sign of relief.
The Dow Jones industrial average closed up 485.21, or 4.7 percent, at 10,850.66 after falling nearly 7 percent on Monday to its lowest close in nearly three years. Monday’s 777-point decline was the largest point drop and 17th largest percentage drop for the blue-chip index. Microsoft, one of the 30 Dow stocks, gained $1.68 today, or 6.7 percent, to close at $26.69 a share. Boeing, also a Dow stock, advanced $1.76 to $57.23.
Broader stock indicators also bounced higher. The Standard & Poor’s 500 index recovered 58.35, or 5.3 percent, to 1,164.74, and the Nasdaq composite index rose 98.60, or 5 percent, to 2,082.33.
The S&P fell 8.8 percent Monday, while the Nasdaq lost 9.1 percent.
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The recovery in stocks wasn’t unexpected as carnage on Wall Street often attracts bargain hunters, though questions remain about how investors will proceed. Without a bailout plan in place to absorb soured mortgage debt and other bad loans from battered banks, investors are left wondering what might restore confidence in lending.
Major stock indexes were almost a sideshow during the session, with the credit markets as the main event. A key rate that banks charge to lend to one another shot higher, a tightening of the availability of credit that could cascade through the economy.
Traders on the floor of the New York Stock Exchange, still stunned from Monday’s rout, warned that the government needs to approve a plan that will sweep away the fears that hobbled the credit markets. While U.S. political leaders have vowed to revisit the issue, the House isn’t slated to meet again until Thursday.
“If it doesn’t pass, then look out below,” said Jason Weisberg, an NYSE trader for Seaport Securities. “It could get ugly.”
Though the blue-chip index roared back today, traders are still worried that a lack of a plan will make it nearly impossible for some companies to fund basic operations like making payroll. Participants in the credit market buy and sell debt that companies use to finance operations.
The benchmark London Interbank Offered Rate, or Libor, that banks charge to lend to one another, rose sharply today, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable-rate mortgages are tied to Libor, so an increase isn’t welcome for many consumers.
Libor for 3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday. Libor for 3-month euro loans, meanwhile, rose to 5.27 percent, from 5.22 percent Monday.
Critics of the bailout package believe that it was too costly and wouldn’t have done enough to jump-start lending. To maintain pressure ahead of Thursday’s likely vote, President Bush said in a statement from the White House early today that the damage to the economy will be “painful and lasting” unless Congress passes the bailout measure.
Traders also were likely focusing on how the bloodshed will look on paper. Today marked the final session of the third quarter — and what is typically the worst month for the stock market — so some portfolio managers might have been trying to do what they could to dress up their performance. Others might simply have wanted to dump holdings in unpopular corners of the market like the financial sector.
The yield on the 3-month Treasury bill rose to 0.92 percent from 0.14 percent late Monday. The yield fell Monday as investors clamored for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.82 percent from 3.58 percent late Monday. The dollar rose against other major currencies and gold prices advanced.
While investors focused on what might come from Washington this week, Wall Street was cheered by several economic readings.
A private research group reported that consumer confidence rose unexpectedly in September. The Conference Board said today that its Consumer Confidence Index rose to 59.8 from a revised 58.5 in August; Wall Street had expected a reading of 55.5, according to Thomson/IFR. The reading, which doesn’t reflect attitudes following Monday’s steep stock market sell-off, remains near a 16-year low.
The Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana, came in at 56.7 compared with 57.9 in August — a second straight month of a strong reading.
Light, sweet crude for November delivery rose $4.27 to settle at $100.64 a barrel on the New York Mercantile Exchange, after earlier rising as high as $101.40.