Stocks End Week Of Drama Virtually Unchanged From Week Ago
NEW YORK (MarketWatch) -- U.S. stocks rocketed higher Friday, with the major stock indexes wiping out a week of shattering losses, as Wall Street cheered the government's moves to kick-start credit markets as well as plans to move against short sellers.
"The world likes what the Federal Reserve is doing right now. The overall market is excited and has more confidence," said Corey Ribotsky, managing member of the N.I.R. Group.
The Dow Jones Industrial Average rose 368.75 points to end at 11,388.44, a lapse of 0.3% from a week ago.
Of the blue-chip index's 30 components, 25 posted gains for the session, with the advance led by American International Group Inc. , up 43.1%.
Major AIG shareholders were said to be pursing a bid to pay off the federal government's loan in time to avoid Uncle Sam from taking an 80% stake in the insurance giant.
Citigroup Inc. also bolstered the Dow, up 24%, followed by Bank of America Corp. , which gained 22.6%.
The S&P 500 Index gained 48.56 points to finish at 1,255.07, a weekly gain of 0.3%, leaving up 0.3% from last Friday's close.
The technology-laden Nasdaq Composite Index jumped 74.80 points to end at 2,273.9, giving it a 0.6% rise for the week.
Early on, the major stock indexes had climbed above the level at which they stood before the start of the watershed week, which saw the Dow Jones Industrial Average lose about 800 points in the first three days of trading.
Bottoms up?
"Panic buyers, most likely the shorts, were willing to pay any price and they sure did," said Elliot Spar, option-market strategist at Stifel Nicolaus & Co., describing the burst higher, especially among financial shares.
But it's too soon to say whether the market has bottomed out, according to Ribotsky. "We have to wait and see what comes out of the whole proposal and package. We'll see what else transpires over the weekend."
Spar agreed, saying: "If details of the grand plan are revealed over the weekend, it may create a sell on the news on Monday morning."
Trading volume proved heavy, with nearly 3 billion shares exchanged on the New York Stock Exchange, and advancers beating decliners roughly 7 to 1. On the Nasdaq, more than 2 billion shares traded, and for every stock on the decline, four advanced.
All of the S&P's 10 industry groups advanced, with the financial and energy sectors leading the charge, the former up 15% and the latter gaining 8.1%.
Financials rallied, with shares of Lehman Brothers Holdings Inc. , climbing 16 cents, or 313.7%, to 22 cents a share.
Shares of Goldman Sachs Group rose 20.2% and Morgan Stanley gained 20.7%.
"Just like a child wishing for a Wii or an Xbox on Christmas Day, the market was hoping for some sort of RTC [Resolution Trust Corp.] type of arrangement, and there it was underneath the Christmas tree," said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.
"It was the booster shot that the market was looking for," he added. "This was what we needed to happen, to remove those assets dwindling on balance sheets. And the short-sale rule, for the sector that it's targeting, will also help near term."
Fed factor
The rally came as President Bush and other administration officials outlined a plan to rescue the struggling financial system at a cost of "hundreds of billions of dollars."
Issuing an emergency order early in the day, the U.S. Securities and Exchange Commission temporarily banned short selling in the shares of nearly 800 financial firms. .
The SEC move may well be prompting pleas from financial-services companies left off the list, including General Electric Co. , American Express Co. and Capital One Financial Corp. -- all of which have large businesses in the financial sector.
On the New York Mercantile Exchange, gold futures plunged the most in more than 25 years, with the spot month closing don $32.30 at $864.70 an ounce.
The price of oil gained, with crude futures recently up $6.67 to end at $104.55 a barrel.
The dollar slipped as investors pondered the possibly negative aspects of the nascent U.S. government plan to take on the toxic assets plaguing the financial sector. .
Treasury prices plunged, sending yields on benchmark notes up the most in two decades. .
Overseas, Chinese stocks in Shanghai and Hong Kong surged more than 9% .
European shares surged to their best one-day percentage gain ever, with the Pan-European Dow Jones Stoxx 600 climbing 8.3%.
Emerging-market stocks around the globe also rallied.
On Thursday, U.S. stocks surged in anticipation of the government rescue plan, with the Dow adding 410 points.
By Kate Gibson