Stocks bounce after initial drop

The Associated Press

Stocks opened sharply lower Thursday before staging a stunning comeback as investors snapped up some of the financial sector’s stronger players and pumped money into raw-material and transportation shares. The Dow Jones industrial average rose more than 160 points.

A drop in crude oil below $101 a barrel helped reverse the stock market’s early losses, particularly among automaker and transportation stocks such as railroad CSX, FordMotor and General Motors.

Early in the day, most bank stocks fell on nervousness about Lehman Bros. Holdings’ announcement early Wednesday that it planned to sell its investment management unit and spin off its commercial real estate assets. The company is seeking to raise capital after making bad bets on holdings tied to real estate.

Traders and analysts appeared unimpressed with the steps outlined by the nation’s No. 4 investment bank, punishing the stock. Citigroup and Goldman Sachs lowered their ratings on the stock to “hold” from “buy.” Lehman fell $3.03, or 42%, to $4.22.


“The steps they’re taking are being seen by Wall Street as too little, too late,” Arthur Hogan, chief market analyst at Jefferies & Co., said of Lehman. “You’re looking at a company that was a $10-billion company last week [and] is a $3-billion company today.”

But later in the day, major financial names including JPMorgan Chase, Wells Fargo and even embattled Washington Mutual soared.

“Not everybody’s in trouble, and people are realizing that,” said Anthony Conroy, managing director for BNY ConvergEx Group. But the market, he added, is very rumor-driven right now, making for exaggerated price movements.

The Dow rose 164.79, or 1.5%, to 11,433.71 after being down 170 points in the early going.


Broader stock indicators rose. The Standard & Poor’s 500 index rose 17.01 points, or 1.4%, to 1,249.05, while the Nasdaq composite index rose 29.52 points, or 1.3%, to 2,258.22.

Despite the gains in the major indexes, declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange.

The Russell 2,000 index of smaller companies rose 1.84 points, or 0.3%, to 719.

A few marquee financial names on Wall Street logged steep declines as investors worried about the health of their balance sheets. Merrill Lynch fell $3.87, or 17%, to $19.43, and Wachovia dropped 80 cents, or 5.3%, to $14.28.

But JPMorgan rose $2.25, or 5.7%, to $41.65; Wells Fargo jumped $2.15, or 6.8%, to $33.85; and Washington Mutual recovered from a steep loss to end up 51 cents, or 22%, at $2.83.

An index of financial stocks in the S&P; 500 index rose 1.5% on Thursday and is down just 1.5% this week -- despite Lehman’s troubles and the wipeout of shares of Fannie Mae and Freddie Mac after the government seized the companies.

The financial-stock index remains 23% above its 10-year low reached July 15, when the last big selling wave hit banks and brokerages.

The dollar was mixed against most other major currencies, while gold prices fell sharply.


Oil futures fell $1.71 to $100.87 a barrel, but gasoline futures rose as Hurricane Ike approached energy installations in the Gulf of Mexico.

Transportation and auto stocks advanced on the falling price of oil. The Dow transportation average rose 3.4%.

United Airlines parent UAL advanced $1.15, or 12%, to $11.12. Continental Airlines rose $2.44, or 15%, to $18.51 after saying it expected new fees and cost cuts to amount to $100 million a year.

CSX rose $5.85, or 11%, to $60.70 after the railroad raised its 2008 earnings forecast.

General Motors jumped $1.33, or 12%, to $12.75. It was the biggest gainer among the Dow’s 30 component stocks. Ford rose 21 cents, or 4.7%, to $4.68.