Stocks rebound after an early slide
The stock market closed higher Thursday after a steep morning slide, as hopes were again raised that the bottom might be near in the sub-prime mortgage crisis.
Standard & Poor’s estimated that bank and brokerage write-downs of sub-prime bonds could reach $285 billion globally, up from a previous $265-billion projection.
But the ratings firm said “the end of write-downs is now in sight for large financial institutions.”
The Dow Jones industrial average, which fell 235 points early in the session on revived worries about the economy and the financial system, ended with a gain of 35.50 points, or 0.3%, to 12,145.74.
Broader indexes also were higher. The Nasdaq composite added 19.74 points, or 0.9%, to 2,263.61. The Standard & Poor’s 500 index rose 6.71 points, or 0.5%, to 1,315.48.
Word that retail sales fell 0.6% in February and that investment fund Carlyle Capital had defaulted on $16.6 billion of debt used to buy mortgage bonds hammered the market after the opening bell.
What’s more, oil prices continued to push higher, rallying 41 cents to a record $110.33 a barrel after trading as high as $111. Three weeks earlier, the price was $98.
Nervous investors again flocked to gold, which reached above $1,000 an ounce for the first time. And the dollar continued to take a drubbing.
By the end of the day, gold eased back to $992.30, though it was still up from $979 on Wednesday. The dollar was at 100.68 yen after briefly trading below 100 yen for the first time since 1995.
As for those European summer vacation plans, good luck: The euro continued to rocket against the dollar, reaching a record $1.562 before ending the day at $1.559.
Government bond yields rose along with stocks. The yield on the benchmark 10-year Treasury note climbed to 3.53% from 3.47% late Wednesday.
Yields on corporate junk bonds surged to 10.02%, a nearly five-year high, from 9.93% late Wednesday, according to an index of 100 high-yield issues compiled by KDP Investment Advisors.
Despite the turnaround in the stock market overall, shares of brokerage Bear Stearns slumped $4.58, or 7.4%, to $57 on fresh concerns about its finances.
Among other financial stocks, mortgage-finance giant Fannie Mae climbed $1.93, or 9.2%, to $22.97.
Rival Freddie Mac added $1.51 to $21.30. Washington Mutual, the largest U.S. savings and loan, climbed 49 cents to $12.13.
On Tuesday, stocks scored their biggest advance in five years after the Federal Reserve said it would inject $200 billion into the financial system.
The Fed said it would temporarily lend Treasury securities to major banks and brokerages in return for mortgage-backed bonds that have become hard for the institutions to sell or value.
Fed policymakers are expected next week to cut their benchmark short-term rate from 3% to at least 2.5%.
In other market highlights Thursday:
* General Motors and Ford Motor slumped after Morgan Stanley slashed earnings estimates for the car makers on concern about domestic sales. GM fell 62 cents, or 3%, to $20.31. Ford sank 31 cents, or 5.4%, to $5.39, a 22-year low.
* Retailers rose despite an unexpected drop in February retail sales reported by the Commerce Department. Tiffany gained $1.52, or 4.1%, to $38.77. Home Depot climbed 35 cents to $26.48.
* Gold stocks rallied along with the metal itself. Newmont Mining gained $2.40, or 4.7%, to $53.78. Barrick Gold jumped $2.41, or 4.8%, to $53.05.
* An index of energy producers in the S&P; 500 rose 1.4% on higher oil and natural-gas prices. Exxon Mobil gained $1.08, or 1.3%, to $87.05. Gas producer Chesapeake Energy gained $2.32, or 5%, to $49.
* Boeing rose $1.73, or 2.4%, to $74.18 after winning orders for 85 airplanes valued at about $11.2 billion, including 35 of its twice-delayed 787 Dreamliners.
* Rising stocks outnumbered decliners by 9 to 7 on the New York Stock Exchange.
* The Russell 2,000 index of smaller-company stocks rose 12.40 points, or 1.9%, to 679.71.
* Shares fell overseas, with Japan’s key index tumbling 3.3% to its lowest level in 2 1/2 years. Shares dropped 1.5% in Britain and Germany and 1.4% in France.
