Wall Street up on hopes of credit recovery

NEW YORK - A rising wave of optimism lifted Wall Street on Monday, propelling the Dow Jones industrials up more than 400 points on more signs of a reviving credit market and support from Federal Reserve Chairman Ben Bernanke for further steps to aid the economy.

All the major indexes finished with gains of 3 per cent or more.

Investors who had sold furiously in recent weeks in response to immobile credit markets became more optimistic as bank-to-bank lending rates eased further. There's also less demand for ultra-safe Treasury bills, another sign that the credit markets are gradually returning to a healthier state.

The improvement in lending rates helped temper concerns that tight credit will contribute to a prolonged recession, but Mr Bernanke still warned that the economy is likely to be 'weak for several quarters, and with some risk of a protracted slowdown.'

But he also told the House Budget Committee that a fresh round of government measures might help ease the country's economic weakness.

There were no details but the White House said it was open to ideas that Congress might put forth.

Wall Street was also sifting through the first of hundreds of earnings reports expected this week, seeking clues about future business conditions. Among those reporting, oilfield services provider Halliburton Co topped estimates, and CEO Dave Lesar told investors and analysts in a conference call, 'We expect that any major macroeconomic disruptions will ultimately correct themselves.'

Trading was orderly for much of the day, but the final hour again saw frenetic activity, this time to the upside, with the Dow rising nearly 140 points in the last 25 minutes.

The market's tone was clearly better than during the previous two weeks, when investors' heightened anxiety about credit markets and the economy sent stocks plunging.

The relative calm in Friday's session, when the Dow fell 127, and Monday's trading, had more investors feeling confident that the worst of the market's losses was behind it.

Still, with back-and-forth trading a hallmark during recoveries from plunges in the past, analysts and investors were also expecting that Wall Street would be subject to volatile price swings for some time.

The Dow rose 413.21, or 4.67 per cent, to 9,265.43. The blue chips' gain were in line with a 4.68 per cent gain registered Thursday, when the Dow jumped 401 points.

The rally marked the Dow's 23rd triple-digit move in 26 sessions.

Most sessions have brought losses, however, with 11 of the past 14 showing declines.

Source: Singapore Business Times - 21 Oct 2008