Stocks open higher, extend gains for 4th day
A stunning rebound in bank shares handed the stock market its best week since November as major indexes shot up about 10%.
Friday’s gains were modest compared with the huge rallies Tuesday and Thursday, but investors welcomed the moderate buying and the market’s ability to hold its ground.
Several other rallies during the long bear market quickly gave way to disappointing sell-offs.
The Dow Jones industrial average rose 53.92 points, or 0.8%, to 7,223.98. The Dow hasn’t put up four straight gains since late November.
The Standard & Poor’s 500 index climbed 5.81 points, or 0.8%, on Friday to 756.55, while the Nasdaq composite index rose 5.40, or 0.4%, to 1,431.50.
More than two stocks rose for every one that fell on the New York Stock Exchange.
For the week, the Dow jumped 9%, its best week since surging 9.7% in the week that ended Nov. 28. The S&P; 500 and the Nasdaq each added 11% this week.
Still, the Dow and the S&P; 500 index are down by about half from their respective peaks in October 2007.
The turnaround began Tuesday as the head of Citigroup said the bank had managed to turn a profit in the first two months of the year. That helped lift the cloud of worry that has cloaked financial stocks since the collapse of Lehman Bros. Holdings Inc. in September.
Also feeding optimism about banks this week was news that an accounting board may recommend an easing of financial reporting rules of tough-to-sell assets. Banks say a change in so-called mark-to-market accounting rules would help their bottom lines.
Traders who last week pounded Citi shares to below $1 began buying the stock again. The week’s gains in the beaten-down industry were enormous: Citigroup surged 73%, Bank of America jumped 83% and Wells Fargo gained 62%.
On Friday, Citigroup rose 6.6%, to $1.78, BofA lost 1.5% and Wells Fargo edged lower.
Analysts said so-called short-covering, in which traders who had gambled that stocks would decline race to reverse their bets, continued Friday to contribute to the week’s rally.
Despite the glimmers of hope, analysts are unwilling to declare that the worst is over.
“We are going to remain cautious because the slightest bit of bad news could turn this thing around,” said Joe Arnold, investment advisor at Dawson Wealth Management in Cleveland.
This weekend is packed with events that could have a significant effect on trading next week.
Finance officials from the Group of 20 countries are meeting in Britain, and a rare interview with Federal Reserve Chairman Ben S. Bernanke is to be broadcast Sunday on CBS’ “60 Minutes.”
After stock indexes fell Monday to their lowest levels in more than 12 years, the rest of the week saw upbeat reports from a number of companies.
Struggling Detroit carmaker General Motors said Thursday that it wouldn’t need the latest installment of government bailout money, and a cut the same day in industrial and finance conglomerate General Electric’s credit rating wasn’t as severe as some had feared.
GM extended its gains on Friday, jumping 54 cents to $22.72. For the week, the stock rose 88%.