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Stocks advance as Wall Street goes hunting for bargains

Stocks advance as Wall Street goes hunting for bargains

Stocks rebounded Wednesday as investors, though still uneasy about shrinking credit and its effect on the economy, scooped up bargains after the previous session's huge tumble.
Many investors believe the Federal Reserve will cut interest rates at its next meeting on Sept. 18 or even sooner and were preparing for Fed Chairman Ben Bernanke to hint at such a move on Friday at a speech in Jackson Hole, Wyoming. The possibility of a rate cut has given Wall Street some hope that the stock market will recover from its summer volatility, and that right now, it's a good strategy to buy while the buying is cheap.
Wall Street was also enthusiastic about signs of corporate muscle. A jump in oil prices fed a rally in energy company stocks, and positive news from technology companies including Seagate Technology gave that sector a boost. Meanwhile, Altria Group Inc. spun off its Philip Morris International cigarette business.
The Fed, although it has not yet indicated that it will lower the benchmark fed funds rate, has been adding cash to the banking system in an attempt to keep the credit markets liquid. The Federal Reserve Bank of New York said Wednesday that it would inject $5.25 billion (euro3.85 billion) through a one-day repurchase agreement, where it buys that amount in collateral from dealers who then deposit the money into commercial banks.
Stock investors kept an eye on the credit markets for signs of loosening. Though the safest assets, Treasurys, are not seeing the same frantic buying they saw a couple weeks ago, assets with a bit more risk, like commercial paper, are having some trouble attracting buyers.
"Everyone's waiting for the dust to settle there," said Steven Goldman, chief market strategist at Weeden & Co. "We're on a little bit better footing, but we're in a healing process that takes time." He added that he regards a Fed rate cut as "mandatory."
In midday trading, the Dow rose 133.72, or 1.03 percent, to 13.175.57, after falling 280 points on Tuesday.
Broader stock indicators also jumped. The Standard & Poor's 500 index added 15.95, or 1.11 percent, to 1,448.31, while the Nasdaq composite index gained 30.88, or 1.23 percent, to 2,531.52.
Bonds were little changed. The yield on the benchmark 10-year Treasury note was at 4.52 percent, the same as late Tuesday, while the yield on the 3-month Treasury bill slipped to 4.09 percent to 4.18 percent.
Light, sweet crude soared $1.47 to $73.20 a barrel on the New York Mercantile Exchange after the U.S. Energy Department reported larger-than-expected declines in gasoline and oil inventories.
Chevron Corp., ConocoPhillips and Exxon Mobil Corp. all rose about 2 percent.
Altria rose 42 cents to $69.50 after announcing it would spin off Philip Morris.
The technology sector was strong, helping to boost the Nasdaq, after several analysts raised their price targets on Seagate Technology in response to its improved fiscal first-quarter outlook. Seagate rose $1.46, or 6 percent, to $25.92.
Nokia Corp. was another standout in tech, after it unveiled new Internet services and gadgets for downloading music and playing games on mobile handsets. Nokia rose $1.98, or 6.6 percent, to $31.99.
The retail sector also lured buyers, after down-market Big Lots Inc. and up-market Williams Sonoma Inc. raised their outlooks _ a good sign that companies don't foresee a significant decline in consumer spending.
The housing market outlook remains weak. Mortgage application volume, refinance volume and purchase volume all fell about 4 percent during the week ended Aug. 24 compared to the prior week, according to the Mortgage Bankers Association's weekly application survey.


Updated : 2021-05-10 04:54 GMT+08:00