Wall Street: Stocks jump, existing home sales show surprise gain
NEW YORK (AP) ” Wall Street extended its big advance Monday as investors applauded a new agreement that will give Bear Stearns Cos. shareholders five times the payout that was set in a JPMorgan Chase & Co. buyout deal a week ago.
Investors were also pleased by a stronger-than-expected housing report, and sent the Dow Jones industrial average nearly 190 points.
JPMorgan boosted investors’ optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan’s earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Bear Stearns shares jumped $3.42, or 57 percent, to $9.38, while JPMorgan rose 58 cents to $46.55.
Beyond the troubles of the financials, Wall Street was examining the housing sector ” the root of much of investors’ angst. A real estate trade group said sales of existing homes rose rather than declined in February, as had been expected.
The Fed’s move and even the housing figures appeared to alleviate some of Wall Street’s concerns about souring mortgage debt and lenders’ resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors’ losses might not be as sizable as feared.
“The reason we’ve rallied the last three or four days is people are saying ‘Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,”‘ said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.
According to preliminary calculations, the Dow rose 187.32, or 1.52 percent, to 12,548.64, after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 20.37, or 1.53 percent, to 1,349.88, and the Nasdaq composite index rose 68.64, or 3.04 percent, to 2,326.75.
The Russell 2000 index of smaller companies rose 19.86, or 2.91 percent, to 701.28.