Stocks rise on reports CIT close to rescue - Wall Street

NEW YORK (AP) — The stock market is extending a big rally from last week on more upbeat earnings and word that troubled lender CIT will avoid bankruptcy.

Both the Dow Jones industrials and the Standard & Poor’s 500 index edged above their recent highs from mid-June on Monday.

News that CIT Group Inc. struck a deal with its bondholders helped stoke the market’s optimism, which got a big boost last week from a string of good earnings news. The Dow and the S&P 500 are coming off their best weekly performance since a spring rally began in March.

CIT’s future was cast in doubt after negotiations with federal regulators for bailout funds fell through. Its failure would have been a blow to investor confidence and would have hurt industries like retailing, which has suppliers who rely on CIT for financing.

A bigger-than-expected rise in a predictor of future economic activity also supported stocks. The Conference Board’s index of leading economic indicators rose 0.7 percent in June, more than the 0.4 percent forecast. It was the third straight month of increases.

Market indicators jumped about 7 percent last week. The huge advance came after a monthlong slide in stocks driven by reports showing the economy was not healing as quickly as hoped. Solid earnings and outlooks from companies like Goldman Sachs Group Inc., Intel Corp. and International Business Machines Corp. gave investors hope that the worst of the recession could be past.

George F. Shipp, chief investment officer at Scott & Stringfellow in Virginia Beach, Va., said word that CIT might be able to sidestep bankruptcy gave investors another sign that the economy and the markets are healing because the government wasn’t forced to intervene.

“The private sector is stepping in where the taxpayer didn’t have to this particular time. That’s the way it’s supposed to work,” he said.

In late afternoon trading, the Dow rose 83.58, or 1 percent, to 8,827.52, surpassing a high of 8,799 hit in June. The S&P 500 index rose 8.10, or 0.9 percent, to 948.48, edging out its high in June of 946.21. The Nasdaq composite index rose 15.52, or 0.8 percent, to 1,902.13, its ninth straight advance.

Among the earnings news, toy maker Hasbro Inc.’s profit rose 5 percent, beating expectations, as strong U.S. revenue offset international sales hurt by the stronger dollar. The stock gained 4.4 percent, rising $1.11 to $26.49.

Oilfield services company Halliburton Co. said its profit tumbled 48 percent amid sluggish exploration and production activity, but the results were better than analyst forecasts and its shares rose 84 cents, or 3.9 percent, to $22.22.

With the bulk of earnings reports still to come, the market has yet to hear from some key industries including retailing. If those results are disappointing, it could force investors to rethink their most recent rally. Several factors are still hanging over the market including record-high unemployment and a damaged housing market.

On Monday, though, the CIT news and optimism over better earnings reports stoked investors’ appetite for risk. Investors moved out of safe-haven assets like U.S. Treasurys and the dollar, and into riskier bets like commodities. CIT jumped 57 cents, or 81 percent, to $1.27.

But some analysts said the market could have a hard time advancing, even with more welcome news.

“The market itself has hit kind of a top here temporarily. People are already getting used to the earnings,” said Matt Lloyd, chief investment strategist at Advisors Asset Management.

Oil prices rose 23 cents to $63.80 a barrel. Gold rose, while the dollar was mixed.

Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.64 percent from 3.66 percent late Friday.

Advancing stocks outnumbered decliners by about 3-to-1 on the New York Stock Exchange, where volume came to a light 739.7 million shares compared with 906.3 million traded at the same point Friday.

The Russell 2000 index of smaller companies rose 5.64, or 1.1 percent, to 524.86.

Overseas, Britain’s FTSE 100 rose 1.3 percent, Germany’s DAX index rose 1 percent, and France’s CAC-40 gained 1.6 percent. Japanese financial markets were closed for a holiday.

source: yahoo finance

Tags: bankruptcy, bse, Cit, citibank, dow, ftse, nasdaq, nse, recession, rescue, russell 2000, us market, us stocks

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