Wall St soars 11% on bank rescue and Morgan deal

NEW YORK - Wall Street roared back from its worst week ever with one of its best single days ever on Monday, as governments pledged to pour cash into struggling banks to restore confidence in a rocky global financial system.

Bargain-hunting investors scoured the wreckage from eight days of losses that had whacked more than 20 per cent off the value of the benchmark S&P 500. Health care, utility and energy stocks rose the most in what was the first day of gains this month for the Dow and S&P 500.

Morgan Stanley drove the rally in financial shares, soaring 87 per cent, after Mitsubishi UFJ Financial Group completed its US$9 billion investment in the US bank as US government support helped nail down a critical deal many investors had feared could fall apart. Wachovia climbed 13.6 per cent after the Federal Reserve approved the US$12.46 billion takeover of the US bank by Wells Fargo & Co.

'The crucial issue for the market has been a lack of confidence and the most recent efforts to ease the credit crunch by governments and central banks have been very positive in terms of building confidence,' said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

Led by Britain, European governments agreed to multibillion-dollar guarantees for the banking system in moves that may become a crucial test of investor faith in government's ability to reverse the downward spiral.

The US Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank also said they would lend commercial banks as much US dollar liquidity as they needed to ease clogged interbank lending rates. The S&P financial index shot up 10.23 per cent.

The Dow Jones industrial average rose 936.42 points, or 11.08 per cent, to 9,387.61, its biggest one-day point gain ever and its biggest percentage gain since March 15, 1933.

The Standard & Poor's 500 Index also notched its best single-day point gain, up 104.13 points, or 11.58 per cent, to 1,003.35. The Nasdaq Composite Index was up 194.74 points, or 11.81 per cent, at 1,844.25, its biggest one-day point gain since January 2001.

Source: Singapore Business Times - 14 Oct 2008