Stocks rise on reports of GM bondholder agreement
Interest rates called the shots on Wall Street for a second day.
Stocks rallied as the Treasury market recovered Thursday, a day after panicky bond investors pushed the government’s long-term borrowing rates to their highest levels in six months.
Major stock indexes rose more than 1%, including the Dow Jones industrial average, which gained more than 100 points.
The yield on the 10-year Treasury note, a widely used benchmark for mortgages and other loans, retreated to 3.67% from 3.69% late Wednesday after the week’s third auction of U.S. government debt attracted ample demand.
“There was a real sigh of relief,” said David Joy, chief market strategist at Ameriprise Financial Inc.’s RiverSource Investments.
The note’s yield had surged the day before, triggering a sell-off in stocks, on concerns that a flood of Treasury securities coming to market this year would overwhelm demand.
In addition to raising the government’s borrowing costs, higher Treasury yields could threaten an economic recovery by driving up consumer interest rates.
The Dow rose 103.78 points, or 1.3%, to 8,403.80. The Standard & Poor’s 500 index rose 13.77 points, or 1.5%, to 906.83, and the Nasdaq composite index advanced 20.71 points, or 1.2%, to 1,751.79.
The Russell 2,000 index of smaller companies rose 0.5%.
About two stocks advanced for every one that fell on the New York Stock Exchange.
The day’s gains put the S&P; 500 back in the black for the year. The Dow remains down 4.3% year to date, while the Nasdaq is up 11%.
Trading was choppy early Thursday in the wake of a jump in oil prices and disappointing news on foreclosures and new-home sales.
The government said sales of new homes edged up only 0.3% in April, less than analysts expected, and a separate report showed that a record 12% of mortgage holders were behind on payments or in foreclosure in the first quarter.
An index of five major home builders slumped 6.3% on the data. Pulte Homes dropped 7.8%. KB Home lost 5.8%.
Energy stocks gained as crude futures rose $1.63 to settle at $65.08 a barrel, a six-month high, on the New York Mercantile Exchange. Marathon Oil jumped 6.1%, while Devon Energy added 3.4%.
Financial stocks in the S&P; 500 climbed 3.6%, more than any of the nine other broad industry groups. JPMorgan Chase jumped 5.7%, while PNC Financial Services Group rose 6.2%.
In the continuing auto industry saga, General Motors rose 15 cents to $1.30 after the carmaker said a committee of bondholders had agreed to a sweetened deal to erase some of GM’s unsecured debt in exchange for stock. The development increases prospects for an orderly reorganization of the company after an expected bankruptcy filing.
