GM pact helps drive stocks
Stocks rose soundly Wednesday after General Motors agreed on a contract with the United Auto Workers and investors speculated that Warren Buffett would buy a stake in Bear Stearns.
GM, by far the biggest advancer among the 30 stocks in the Dow Jones industrial average, led the market higher from the outset with news it had struck a tentative contract agreement with the United Auto Workers that could allow the company to shed some of its burdensome healthcare costs.
Rumors that Bear Stearns would sell a piece of itself took on new urgency in the last hour of trading with a report that Buffett’s Berkshire Hathaway was interested.
“Warren Buffett buying a stake in Bear Stearns would be a vote of confidence in the financial sector if it’s true,” said Michael Metz, chief investment strategist at Oppenheimer Holdings. “It revives hopes of more takeovers and is positive for stocks.”
The Dow gained 99.50 points, or 0.7%, to end at 13,878.15. The Standard & Poor’s 500 index advanced 8.21, or 0.54%, to 1,525.42. The Nasdaq composite index added 15.58 points, or 0.6%, closing at 2,699.03. The Russell 2,000 index of smaller companies rose 6.12 points, or 0.8%, to 809.12.
Advancers outnumbered decliners by more than 2 to 1 on the New York Stock Exchange.
Treasury yields fell in the wake of surprisingly strong demand in a government sale of $18 billion in new two-year Treasuries. The benchmark 10-year note’s yield fell to 4.62% from 4.64% late Tuesday.
The dollar recovered slightly against other major currencies, but only after hitting another record low against the euro. Gold prices fell.
Oil finished higher after a turbulent day ended with a late rally. Crude futures settled at $80.30 a barrel in New York, up 77 cents.
The stock market shrugged off a government report that demand for durable goods fell in August by the largest amount in seven months. That followed data released Tuesday showing that sales of existing homes stalled in August and consumer confidence fell in September.
Although such reports are on their face troubling, Wall Street often regards them as good news because they may help justify another interest rate cut by the Federal Reserve. The central bank last week surprised Wall Street with a larger-than-expected half-point cut -- the first reduction in four years -- that sent stocks surging.
In corporate news, GM jumped $3.22, or 9.4%, to $37.64 after workers agreed to return to their jobs after a two-day strike.
Ford Motor gained 54 cents to $8.88. Auto parts suppliers also rallied. American Axle & Manufacturing Holdings gained $1.68 to $24.94. Automotive seat maker Lear rose $1.81 to $33.26.
Bear Stearns was higher throughout the session amid the rumors that it would sell off a piece of the company. The investment bank then doubled its gains on a report that Buffett, among others, had shown interest in buying a stake. The stock finished up $8.76, or 7.7%, at $123.
In other market highlights:
* Home builders fell after mortgage applications in the U.S. decreased 2.8% last week, led by the biggest drop in purchases since January, according to the Mortgage Bankers Assn. Pulte Homes dropped $1.17, or 8%, to $13.47 for the steepest decline in the S&P; 500. KB Home lost $1 to $24.09, its lowest level since May 2003.
* Children’s Place Retail Stores surged $1.81 to $25.80. The firm asked its chief executive to resign after an internal probe found he had violated internal policies for securities trades.
* Procter & Gamble gained 66 cents to $70.51, its highest level since at least 1980.
* Whole Foods Market advanced $2.25 to $47.97. RBC Capital Markets said the stock could climb to $55 on accelerating same-store sales.
* Monsanto added $2.91 to $83.75 after saying it expected its corn seeds to gain market share outside the U.S.
* Chevron gained 63 cents to $92.51 after saying it would buy back as much as $15 billion of its stock, or about 7.6% of its current market value.
* MetLife climbed $1.13 to $69.69. The insurer increased its stock buyback program by $1 billion, or 2% of its market value.
* Office Depot added $1.03 to $20.25. JPMorgan raised its recommendation on the shares to “overweight” from “neutral,” saying there was “room for shareholder activism” at the chain.
* SLM fell $1.24 to $45.01. The provider of student loans said the group planning to buy the company didn’t expect to complete the $25.3-billion purchase.
* Newmont Mining fell $2.79, or 5.9%, to $44.90. The firm said its 2007 costs might exceed an earlier forecast of as much as $400 per ounce of gold.
* Key stock indexes rose 0.6% in Britain, 0.5% in Germany, 0.9% in France and 0.2% in Japan but fell 0.5% in Hong Kong.