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Wall Street rebounds after GE rating cut

Wall Street rebounds after GE rating cut

Wall Street extended its rally into a third straight session as investors took in stride a cut in General Electric Co.'s credit rating.
Standard & Poor's lowered GE's top rating one notch because of problems at the conglomerate's lending arm. The market initially dipped on the move but then recovered, a positive sign for stocks that have been rebounding from 12-year lows this week. On Tuesday and Wednesday, the market had its first two-day advance in more than a month.
And GE shares rose more than 10 percent to $9.35, becoming the biggest gainer Thursday in the Dow. GE stock sank to an 18-year low of $5.73 last week.
Investors' spirits were lifted because S&P decided not to put GE on watch for another downgrade, said Kim Caughey, equity research analyst at Fort Pitt Capital Group.
"The ratings agencies have been asleep at the switch and have gotten a lot of blame for what's going on, so they're trying to be more proactive. Knowing that they're being proactive, and yet GE maintained a stable rating after this downgrade, it's oddly encouraging," Caughey said.
S&P and other ratings services have been criticized over the past year for failing to identify risks in subprime mortgage investments, whose collapse helped set off the global financial crisis
The fact that investors were looking for a silver lining in negative news could be a good signal.
"A sign of the market that's making a bottom is a market that does not go down when the news is bad," said David Kotok, chairman and chief investment officer of Cumberland Advisors.
In midmorning trading, the Dow Jones industrial average rose 97.56, or 1.41 percent, at 7,027.96, after falling in earlier trading. The Dow rose nearly 4 points on Wednesday after soaring 379 on Tuesday in response to news that Citigroup Inc. operated at a profit in January and February.
Broader stock indicators also turned higher. The Standard & Poor's 500 index rose 11.22, or 1.56 percent, to 732.58, and the Nasdaq composite index rose 14.62, or 1.07 percent, to 1,386.26.
The Russell 2000 index of smaller companies rose 7.53, or 2.06 percent, to 373.83.
Government data showed the economy continues to deteriorate.
The Labor Department said first-time claims for unemployment benefits rose to 654,000 from the previous week's figure of 639,000, more than analysts' expectations.
The Commerce Department said retail sales fell by 0.1 percent in February _ less than the 0.5 percent drop economists predicted, but the seventh decline in eight months. It also reported that business reduced inventories for a fifth straight month in January.
The pharmaceutical industry was driven higher Thursday by more acquisition news.
Switzerland's Roche Holding AG agreed to buy Genentech Inc. for $46.8 billion, acquiring the 44 percent stake in the biotech firm that it doesn't already own for $95 a share.
Gilead Sciences Inc. agreed to buy CV Therapeutics Inc. for $1.4 billion.
Earlier this week, drugmakers Merck and Schering-Plough agreed to merge in a $41 billion deal. Investors, however, were largely unimpressed. Consolidation in the drug industry has long been expected as companies struggle with withering sales and increased competition.
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