NEW YORK (AP) _ Wall Street snapped back Tuesday after its biggest sell-off in years amid growing expectations that lawmakers will salvage a $700 billion rescue plan for the financial sector. But the seized-up credit markets where businesses turn to raise money showed no sign of relief.
The recovery in stocks wasn't unexpected as carnage on
Wall Street often attracts bargain hunters, though questions remain
about how investors will proceed. Without a bailout plan in place to
absorb soured mortgage debt and other bad loans from battered banks,
investors are left wondering what might restore confidence in lending.
Traders on the floor of the New York Stock Exchange" id="ORCRP001376">New York Stock Exchange,
still stunned from Monday's 778-point rout in the Dow Jones industrial
average, warned that the government needs to approve a plan that will
sweep away the fears that hobbled the credit markets. While U.S.
political leaders have vowed to revisit the issue, the House isn't
slated to meet again until Thursday.
"If it doesn't pass, then look out below," said Jason Weisberg, an NYSE trader for Seaport Securities. "It could get ugly."
the blue-chip index rose nearly 500 points by late afternoon, the main
worry for traders is that a lack of a plan will make it nearly
impossible for some companies to fund basic operations like making
payroll. Participants in the credit market buy and sell debt that
companies use to finance operations.
The benchmark London
Interbank Offered Rate, or LIBOR, that banks charge to lend to one
another, rose sharply Tuesday, making it more expensive and difficult
for consumers and businesses to borrow money. In addition, credit card
debt and more than half of adjustable-rate mortgages are tied to LIBOR,
so an increase isn't welcome for many consumers.
3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday.
LIBOR for 3-month euro loans, meanwhile, rose to 5.27 percent, from
5.22 percent Monday.
Critics of the bailout package believe that
it was too costly and wouldn't have done enough to jump-start lending.
To maintain pressure ahead of Thursday's likely vote, George Bush" id="PEPLT000857">President Bush said in a statement from the The White House" id="PLCUL000110">White House early Tuesday that the damage to the economy will be "painful and lasting" unless Congress passes the bailout measure.
Wall Street, many traders likely will proceed cautiously while they
gauge prospects for resurrecting the bailout effort, which was backed
by leaders of both parties.
"I'm not getting the sense that
investors are going to be jumping in with both feet until there is some
kind of resolution on the plan," said James Maguire, an NYSE floor
trader with Christopher J. Forbes. "If there's a no vote, we're going
to see a lower overall drift in stocks. It will be a slow bleed."
also will likely focus on how the bloodshed will look on paper. Tuesday
marks the final session of the third quarter - and what is typically
the worst month for the stock market - so some portfolio managers might
try to do what they can to dress up their performance. Others might
simply wish to dump holdings in an unpopular corners of the market like
the financial sector.
At the close, the Dow rose 485.21, or 4.68
percent, to 10,850.66 after falling nearly 7 percent on Monday to its
lowest close in nearly three years. It was the largest point drop and
17th largest percentage drop in the blue chip index. The percentage
decline was far less severe than the 20-plus-percent drops seen in the
stock market crash of October 1987 and before the Great Depression.
stock indicators also bounced higher. The Standard & Poor's 500
index recovered 58.34, or 5.27 percent, to 1,164.73, and the Nasdaq
composite index rose 98.60, or 4.97 percent, to 2,082.33.
The S&P fell 8.79 percent Monday, while the Nasdaq lost 9.14 percent.
yield on the 3-month Treasury bill rose Tuesday to 0.89 percent from
0.14 percent late Monday. The yield fell Monday as investors clamored
for the safety of government debt. The yield on the benchmark 10-year
Treasury note, which moves opposite its price, rose to 3.83 percent
from 3.58 percent late Monday. The dollar rose against other major
currencies and gold prices advanced.
While investors focused on what might come from Washington this week, Wall Street was cheered by several economic readings.
private research group reported that consumer confidence rose
unexpectedly in September. The Conference Board said Tuesday its
Consumer Confidence Index rose to 59.8 from a revised 58.5 in August;
Wall Street had expected a reading of 55.5, according to Thomson/IFR.
The reading, which doesn't reflect attitudes following Monday's steep
stock market sell-off, remains near a 16-year low.
The Chicago" id="PLGEO0100100501250000">Chicago Purchasing Managers' index, which measures business conditions across Illinois" id="PLGEO100100500000000">Illinois, Michigan and Indiana" id="PLGEO100102100000000">Indiana, came in at 56.7 compared with 57.9 in August - a second straight month of a strong reading.
Light, sweet crude rose $4.27 to settle at $100.64 on the New York Mercantile Exchange" id="ORCRP001702">New York Mercantile Exchange. Oil fell more than $10 a barrel Monday as investors worried that a weaker economy would curtail demand.
issues outnumbered decliners by about 2 to 1 on the New York Stock
Exchange, where volume came to a light 1.02 billion shares.
The Russell 2000 index of smaller companies rose 22.86, or 3.32 percent, to 679.58.
Japan's Nikkei stock average fell 4.12 percent. But Hong Kong's Hang
Seng index rose 0.76. Britain's FTSE 100 rose 1.74 percent, Germany's
DAX index added 0.41 percent, and France's CAC-40 rose 1.99 percent.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com