Stocks move higher after 5 days of heavy selling
Stocks broke a five-day losing streak Wednesday as hope spread that China and the U.S. were taking convincing action to restart their economies.
Prices for key commodities such as oil and metals also soared, lifting shares of industrial companies such as Alcoa and Caterpillar.
Speculation that China will unveil more government spending this week on major construction projects drove up worldwide prices for raw materials and the companies that produce them.
In Washington, the Obama administration announced details of a plan that could help struggling U.S. homeowners by lowering the cost of their monthly mortgage payments.
The advance followed five straight sessions of unrelenting selling that left major indexes at levels not seen in more than a decade. That left stocks overdue for a bounce, traders said.
Wall Street followed the lead of overseas markets, which rose sharply on optimism over the possible Chinese economic stimulus plan. In the U.S., investors were further encouraged by details of a Washington program designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.
The Dow Jones industrial average rose 149.82, or 2.2%, to 6,875.84. Broader indexes also rose. The Standard & Poor’s 500 added 16.54, or 2.4%, to 712.87. The Nasdaq composite index gained 32.73, or 2.5%, to 1,353.74. The Russell 2,000 index of smaller companies rose 10.29, or 2.9%, to 371.30.
Industrial and commodity stocks led the market higher as oil prices jumped on hopes for the Chinese stimulus. Aluminum producer Alcoa jumped 71 cents, or 12.8%, to $6.24, and Caterpillar rose $2.97, or 13.2%, to $25.44. Exxon Mobil rose $1.32, or 2.1%, to $65.68, while Chevron rose $1.55, or 2.7%, to $59.28.
Not all stocks carved gains. General Electric hit an 18-year low Wednesday as it fought continued speculation that it may have to sink more money into GE Capital, which makes loans for credit cards, overseas mortgages and commercial projects. The stock fell 32 cents, or 4.6%, to $6.69, after falling as low as $5.73, a level not seen since 1991.
News that U.S. Bancorp, seen as one of the industry’s healthier players, is chopping its dividend 88% weighed on financial stocks. U.S. Bancorp fell $1.57, or 12.5%, to $11.01.
Analysts warned that the market’s advance Wednesday could be fleeting. “Everybody’s been beaten up so much in the last couple weeks, you’ve got to believe that people are gunshy . . . particularly ahead of the Friday employment numbers,” said Bill Stone, strategist at PNC Wealth Management.
The stock rally put pressure on bond prices, which investors had fled to as a haven. The yield on the benchmark 10-year Treasury note was 2.98%, up from 2.89% late Tuesday.
