Wall Street bolted higher Monday after Standard & Poor's affirmed its ratings for Ambac Financial Group and MBIA, raising hopes that...
NEW YORK — Wall Street bolted higher Monday after Standard & Poor’s affirmed its ratings for Ambac Financial Group and MBIA, raising hopes that troubled bond insurers will emerge from the credit-market crisis on solid footing.
The Dow Jones industrial average rallied 189.20 to 12,570.22.
Microsoft, one of the 30 Dow stocks, added 16 cents to close at $27.84. Boeing, also a Dow stock, gained $1.62 to $84.66.
Broader stock indexes also closed with a solid advance. The Standard & Poor’s 500 index rose 18.69 to 1,371.80; and the Nasdaq composite index added 24.13 to 2,327.48.
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The news came as a relief to a market that has fallen sharply in recent months on any negative news about the insurers; investors feared that a downgrade of the insurers would lead to billions of dollars in writedowns of securities held by already troubled banks and investment firms.
Rating agencies including S&P have been under pressure to downgrade the insurers after they had weakened their financial positions by insuring subprime mortgage securities that later collapsed.
There has been speculation that Ambac might find sufficient capital early this week to hold onto the stellar “AAA” rating it needs to remain in the municipal-bond business. Municipalities and companies use these insurers to back bonds to get higher ratings and cheaper financing.
“This is essentially evidence that S&P has signed off any tentative deal,” said Charlie Smith, chief investment officer at Fort Pitt Capital Group, of the rating agency’s announcement.
Financial institutions have already suffered billions of dollars in losses from securities that lost value during the fourth quarter.
Chris Johnson, president of Johnson Research Group, said the market continues to look for any sign that financial stocks will make it through the credit crisis. Experts think keeping bond insurers whole will spare greater losses for major global banks and brokerages.
“Even the smallest bit of positive news and the market takes off,” he said. “Investors get excited if they sense a bottom in the financials because they’ve been the Achilles’ heel of this market.”