Dec 21, 2007 5:00 pm US/Eastern
Stocks Rise On RIM, Merrill Reports
NEW YORK (AP) ―
Stocks jumped Friday following a better-than-expected rise in
profits at Research in Motion Ltd. and on word that Merrill Lynch may
have lined up a big cash infusion from a Singapore fund.
The Dow Jones industrial average gained more than 200 points and,
along with the other major indexes, posted a gain of more than 1.5
percent.
The developments seemed to allay investor fears that economic growth
would succumb to tightness in the credit markets. Adding to the measure
of relief some investors felt, the Federal Reserve said after the
opening bell that it would continue with its special biweekly auctions
for banks as long as necessary to relieve strains in the short-term
debt market.
The announcements came as the New York Stock Exchange set a record
for volume in the first half hour of trading during what is known as
"quadruple witching." It marks the simultaneous expiration of contracts
for stock index futures, stock index options, stock options and single
stock futures and often leads to heavy trading near the start and end
of the session.
According to preliminary calculations, the Dow rose 205.01, or 1.55 percent, to 13,450.65.
Broader stock indicators also showed strong gains. The Standard
& Poor's 500 index rose 24.35, or 1.67 percent, to 1,484.47, and
the Nasdaq composite index advanced 51.13, or 1.94 percent, to 2,691.99.
Advancing issues outnumbered decliners by about 3 to 1 on the New
York Stock Exchange, where volume came to 2.32 billion shares compared
with 1.38 billion traded Thursday.
Stocks rose for the second day after Research in Motion said late
Thursday that its fiscal third-quarter profit more than doubled on
strong demand for its BlackBerry smart phones. The results gave Wall
Street hope that the technology sector has room to expand and that
consumers and businesses are still spending.
Adding to investors' upbeat mood, The Wall Street Journal reported
that Merrill Lynch & Co., facing hefty writedowns due to losing
bets on subprime mortgages, is in talks to secure a capital infusion of
as much as $5 billion. The money is expected to come from Singapore
state-owned investment agency Temasek Holdings Pte. Ltd., a fund that
in late July said it would buy a 1.77 percent stake in Barclays PLC for
$2 billion.
Sovereign funds have been providing troubled U.S. and European banks
with much-needed cash. Over the past month, the Abu Dhabi Investment
Authority bought a stake in Citigroup Inc. for $7.5 billion; the
Government of Singapore Investment Corp. invested $9.75 billion in UBS
AG; and this week China Investment Corp. paid $5 billion for a stake in
Morgan Stanley.
Meanwhile, a Commerce Department report on personal spending brought
investors mixed news. Spending rose by 1.1 percent in November, the
largest amount in 3 1/2 years. But the Fed's preferred inflation
measure — the year-over-year core personal consumption expenditures
deflator — rose 2.2 percent. That's above the Fed's comfort level of 1
percent to 2 percent, and could make it harder for the central bank to
justify further rate cuts aimed at spurring economic growth.
"I think that investors are impressed with the tenacity of the
consumer in the face of the current economic headwinds as well as the
self-help actions being taken by some of the distressed financial
firms," said Alan Gayle, senior investment strategist at Trusco Capital
Management.
He contends the market was poised to move higher after digesting a recent bout of bad news.
"We have been expecting a Santa Claus rally in part because of
seasonal factors but also because we feel like the market valuations
remain reasonable," Gayle said.
Bond prices fell sharply following the Fed's announcement it would
continue its special auctions. The yield on the 10-year Treasury note,
which moves opposite its price, surged to 4.17 percent from 4.06
percent late Thursday. The dollar was mixed against other major
currencies, while gold prices fell.
Light, sweet crude rose $2.25 to settle at $93.31 a barrel on the New York Mercantile Exchange.
Wall Street began what some are hoping could be a late-December
rally. But with only six trading days left in the year no doubt some
skepticism remains about whether investors can pull off a sustained
rally.
Companies like Research in Motion have reported solid sales growth,
but others have had a harder time staying profitable as U.S. consumers
struggle with sinking home prices and high energy and food costs.
Research in Motion jumped $11.78, or 11 percent, to $118.78.
Morgan Stanley rose $3, or 5.8 percent, to $54.37 on the Journal report.
Electronics retailer Circuit City Stores Inc. fell $1.91, or 29
percent, to $4.75 after posting a wider-than-expected loss for the most
recent quarter due to lower extended warranty sales and restructuring
costs.
The Russell 2000 index of smaller companies jumped 18.04, or 2.35 percent, to 785.58.
Overseas, Japan's Nikkei stock average rose 1.50 percent, and
Hong Kong's Hang Seng index added 2.26 percent. Britain's FTSE 100
gained 1.39 percent, Germany's DAX index advanced 1.70 percent and
France's CAC-40 rose 1.66 percent.
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