Wall Street bounces back
The bulls prevailed on Wall Street on Wednesday, driving share prices broadly higher after the previous session’s deep slump.
Hard-hit financial and housing-related stocks led the way as concerns about the sub-prime mortgage crisis eased a bit.
It was touch-and-go for the first few hours of trading as the Dow Jones industrial average followed Tuesday’s 242-point, 2% plunge with a drop of as much as 136 points by midday.
Then the buyers jumped back in. The Dow finished with a gain of 57.44 points, or 0.5%, to 12,133.40.
“The bulls won” Wednesday, said Richard Weiss, who manages about $50 billion as chief investment officer at City National Bank in Beverly Hills. “But I think it’s going to be a very even match between bulls and bears this year.”
Broader market indexes also advanced as winners topped losers by about 3 to 2 on the New York Stock Exchange.
The Standard & Poor’s 500 index rebounded 9.22 points, or 0.7%, to 1,387.17, after diving 2% the previous day.
The Nasdaq composite gained 21.17 points, or 0.9%, to 2,371.74. It fell 2.2% on Tuesday.
The market’s rout Tuesday was triggered by the continuing meltdown of lenders in the sub-prime mortgage market, or loans to people with poor credit histories. That also was one of the catalysts for the sharp sell-off Feb. 27, when the Dow plummeted 416 points, or 3.3%, the worst one-day slide in nearly four years.
Some investors fear that a growing credit crunch for high-risk borrowers could worsen the housing market’s decline and push the economy into recession.
Concern also has mounted that the sub-prime lenders’ problems, caused by rising defaults on loans, could pull down other financial companies, such as big investment banks that have supplied credit to mortgage lenders.
Shares of brokerage Lehman Bros. fell as low as $68.07 on Wednesday after the company said fiscal first-quarter earnings rose 6%, held back in part by weakness in revenue from trading mortgage-backed bonds and other fixed-income securities. But the company’s stock trading revenue surged.
Lehman also said the risks it faced from mortgage delinquencies were “well contained.”
“Lehman got beaten up, then they faced it in their [analyst] conference call and said, ‘We can handle it,’ ” said Quincy Krosby, who helps manage $325 billion as chief strategist at Hartford Financial Services Group in Hartford, Conn. “That gave confidence to buyers to come back in.”
Lehman stock rallied from its low to close at $71.72, down 28 cents for the day.
In the broad market, traders said the approach of the quarterly expiration and settlement of March futures and options contracts Friday -- known as quadruple witching -- added to the day’s volatility.
Many analysts are warning investors to get used to wilder trading swings as the market sorts out the issues the economy faces from housing’s woes and whether recession is a serious risk.
Among the day’s market highlights:
* Asian and European markets plunged overnight after Wall Street’s decline Tuesday. The Shanghai composite index slid 2%, the Nikkei 225 index in Tokyo lost 2.9%, German shares dropped 2.7% and the Russian market sank 2.1%.
But early today Asian markets were rebounding. The Nikkei index was up 1.4%.
* The yen slipped against the dollar after rising Tuesday. The dollar ended at 116.73 yen in New York, up from 116.52. Near-term gold futures lost $6.70 to $640.90 an ounce.
* Treasury bond yields edged up after sliding Tuesday, when some investors fled to high-quality bonds for safety. The 10-year T-note yield ended at 4.54%, up from 4.49%.
Corporate “junk” bond yields also rose amid continuing jitters over risky assets. But analysts said it was an encouraging sign that Freeport-McMoRan Copper & Gold managed to sell $6 billion of junk bonds to investors -- the largest junk offering since the 1989 financing deal for the buyout of RJR Nabisco.
* Shares of mortgage lenders rallied after taking a pounding in recent weeks. Accredited Home Lenders jumped $2.07 to $6.04 on speculation it could be acquired. Also gaining were Countrywide Financial, up 90 cents to $34.39; IndyMac Bancorp, up $1.96 to $28.94; and NovaStar Financial, up 75 cents to $4.18.
Home builders also gained. Ryland Group rose $1.69 to $44.79 and Standard Pacific was up 71 cents to $22.71.
* In the brokerage sector, Bear Stearns rose $2.32 to $145.29 and Morgan Stanley rallied $1.73 to $73.81. But Merrill Lynch fell 52 cents to $79.22.
* Qualcomm gained $1.38 to $43.21 after JPMorgan Securities upgraded the stock, saying the business fundamentals for the wireless technology company were improving.
* Energy stocks were higher as near-term crude oil futures inched up 23 cents to $58.16 a barrel, the first increase after four straight declines.
* Wm. Wrigley climbed $2.29 to $51.35. The world’s largest chewing gum company said it planned to increase prices 10% in the U.S. starting in the second and third quarters.
* On the downside, retail shares weakened. J.C. Penney fell $1.76 to $78.50, Target lost $1.17 to $59.30 and Sears Holding was off $2.41 to $174.08.
