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Dow surges as S&P revises ratings for two bond insurers

Dow surges as S&P revises ratings for two bond insurers

Wall Street bolted higher Monday after Standard & Poor's affirmed its ratings for Ambac Financial Group Inc. and MBIA Inc., raising hopes that troubled bond insurers will emerge from the credit market crisis on solid footing.
The news came as a relief to a market that has fallen sharply in recent months on any negative news about the insurers; investors feared that a downgrade of the insurers would lead to billions of dollars in write-downs of securities held by already troubled banks and investment firms. Rating agencies including S&P have been under pressure to downgrade the insurers after they had weakened their financial positions by insuring subprime mortgage securities that later collapsed.
There has been speculation that Ambac might find sufficient capital early this week to hold onto the stellar "AAA" rating it needs to remain in the municipal bond business. Municipalities and companies use these insurers to back bonds, allowing them to get higher ratings and cheaper financing.
"This is essentially evidence that S&P has signed off any tentative deal," said Charlie Smith, chief investment officer at Fort Pitt Capital Group, of the rating agency's announcement.
The Dow rose 189.20, or 1.53 percent, to 12,570.22. Broader stock indexes also closed with a solid advance. The Standard & Poor's 500 index rose 18.69, or 1.38 percent, to 1,371.80; and the Nasdaq composite index added 24.13, or 1.05 percent, to 2,327.48.
Oil prices hovered near US$100 a barrel with supply concerns heightened by a Turkish military incursion into northern Iraq and warnings by Iran against further international sanctions. A barrel of light, sweet crude rose US$0.42 to US$99.23 on the New York Mercantile Exchange.
Wall Street also was positive after the National Association of Realtors reported existing homes fell less than forecast in January. Investors, while still wary of recession, grew hopeful the housing market might be on the verge of bottoming out with a rebound expected to start toward the end of this year.
The Russell 2000 index of smaller companies rose 15.03, or 2.16 percent, to 710.46.


Updated : 2021-05-18 21:52 GMT+08:00