RTRS: Wall Street rises on optimism on banks, economy
Stocks rose on Wednesday on optimism the new administration was moving quickly to stabilize the ailing banking sector and hopes of another stimulus package to stave off further deterioration in the economy.
Focus was also on an expected statement from the Federal Reserve's monetary policy-setting Federal Open Market Committee. Investors will be watching for signals of any nonconventional methods of fighting the credit crisis after the Fed ends its scheduled two-day meeting.
Bank shares led the way up on hopes of help for the battered sector after a Bloomberg report that the Federal Deposit Insurance Corp is aiming to take control of a "bad bank", to be set up by the government to mop up banks' toxic assets.
The Financial Select Sector SPDR XLF.P jumped more than 9 percent, while JPMorgan Chase (JPM.N) was the Dow's biggest lift, gaining 9.7 percent to $27.50, and Bank of America (BAC.N) rose 16.5 percent to $7.57. Since hitting a 14-year low last week, financials have staged a rally, outperforming the broad S&P 500.
"Optimism that the Federal Reserve and the Treasury may lift bad assets off of good banks is helping the market," said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania.
"Shareholders were worried about losses becoming open-ended."
The Dow Jones industrial average .DJI rose 105.06 points, or 1.29 percent, to 8,279.79. The Standard & Poor's 500 Index .SPX gained 15.47 points, or 1.83 percent, at 861.18. The Nasdaq Composite Index .IXIC was up 28.86 points, or 1.92 percent, at 1,533.76.
The S&P 500 was on course for its fourth up day in a row, making for the longest winning streak in two months.
The House of Representatives plans to vote later in the day on President Barack Obama's $825 billion package to stem the deterioration in the U.S. economy. Most House Republicans were expected to oppose the proposal but Democrats were confident they had the votes to push it through.
Investors are hopeful for quick action to prevent the U.S. economy, in recession for over a year, from worsening.
House Democrats are seeking a final bill on the stimulus package for Obama to sign into law by mid-February, while new Treasury Secretary Tim Geithner is expected to propose efforts to unclog frozen credit markets within the next two weeks.
Shares of Wells Fargo & Co (WFC.N) climbed 21.8 percent to $19.72 after it reported a surprise quarterly loss but maintained its dividend and said it has no plans to request new capital from the government's financial aid program.
On the Nasdaq, Yahoo Inc (YHOO.O) rose after its quarterly results beat analysts' expectations after Tuesday's close, helped by cost cuts in a weak advertising market. Yahoo was up 8.1 percent at $12.26.
Despite some bright spots, analysts agreed the earnings season has been a weak one, as expected, with companies announcing massive job cuts as they grapple with the worldwide economic downturn.
Dow component AT&T Inc (T.N) fell 4.2 percent to $24.85 after profit fell on high subsidies to support Apple's (AAPL.O) iPhone, while more consumers disconnected their land lines.
