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Wall Street stages a recovery

Wall Street stages a recovery

U.S. stocks notched up modest gains Wednesday amid upbeat earnings from tech giant Hewlett-Packard which eased investor jitters even as mortgage giants Fannie Mae and Freddie Mac went into a new freefall.
In choppy trade, the Dow Jones Industrial Average closed up 68.88 points (0.61 percent) at 11,417.43.
The Nasdaq composite rose 4.72 points (0.20 percent) to 2,389.08 and the broad-market Standard & Poor's 500 index added 7.85 points (0.62 percent) to 1,274.54.
The indexes alternated between gains and losses as traders followed ups and downs in the oil market. New York's main oil futures contract, light sweet crude for September delivery, closed up US$1.11 at US$114.98 a barrel.
Sentiment was helped by HP's report Tuesday that its profit for the quarter just ended rose 14 percent to US$2 billion. The company also offered a better-than-expected outlook.
This eased selling fever on Wall Street in the past two sessions stemming from worries about more troubles in the U.S. real estate sector that will likely widen losses for banks.
"Strong earnings guidance from Hewlett-Packard after the close last night appear to have reinvigorated the bulls, despite relatively uninspiring quarterly reports elsewhere on the Street," said Andrea Kramer at Schaeffer's Investment Research.
But keeping trade cautious was skittishness over the future of Fannie and Freddie, the two government-sponsored enterprises that underpin trillions of U.S. dollars in mortgages.
Freddie Mac shares plummeted 22 percent to US$3.25 and Fannie Mae sank 27 percent to US$4.40 on renewed fears of insolvency and a possible government bailout. Both have lost over 90 percent in the past year.
Some reports said that solvency concerns were mounting as Freddie Mac was forced to pay a high premium on its just-issued bonds, raising the prospect of a government bailout.
"The steep price of new debt raises the level of difficulty for both institutions in remaining solvent as higher interest rate costs cuts steeply into their operating margins thereby threatening both agencies with even deeper losses in coming quarters," said Fred Dickson at DA Davidson & Co.
"The fate of Fannie Mae and Freddie Mac for equity holders in those issues will remain a high level topic of concern for not only holders of those issues but for the entire market."
Among other key shares, investment bank Lehman Brothers shares rebounded somewhat from recent heavy losses, up 5.05 percent to US$13.73 while Citigroup advanced 1.75 percent to 17.49.
Hewlett-Packard led the gainers, rising 5.65 percent to US$46.16.
Bonds firmed. The yield on the 10-year Treasury bond fell to 3.799 percent from 3.842 percent Tuesday and that on the 30-year bond eased to 4.443 percent against 4.469 percent. Bond yields and prices move in opposite directions.


Updated : 2021-05-17 19:19 GMT+08:00