Updated from 9:36 a.m. EDT
U.S. stocks roared higher Friday following reports that the government was creating a sweeping fix for the financial crisis. Further support came in the form of a moratorium on short-selling by the
Securities and Exchange Commission
Dow Jones Industrial Average
was jumping 299 points to 11,319, and the
gained 37 points to 1244. The
added 57 points to 2256.
Financial stocks were off to the races. Names including
were all showing sizable double-digit gains.
During Thursday's volatile session, the major indices swung back and forth before rallying sharply in the afternoon. The
Dow Jones Industrial Average
traded in a 617-point range before gaining 410 points, or 3.9%. The S&P 500 and Nasdaq added 4.3% and 4.8%, respectively.
The late gains came on a
report that the Treasury Department was formulating an entity that would remove bad debt from companies' balance sheets. The plan includes a possible $800 billion fund to buy bad debt from troubled financial firms.
Early Friday, the Treasury said it would offer $50 billion from its Exchange Stabilization Fund to insure
mutual funds. A number of such funds have lately been under fire thanks to investment in bad debt from bankrupt
and flailing insurer
also said it would build on its liquidity programs to assist money-market funds, by taking steps that include buying short-term debt issued by
Federal Home Loan Banks
Speaking at a press conference Friday morning, Treasury Secretary Henry Paulson said that government-sponsored entities Fannie Mae and Freddie Mac would continue to buy mortgage-backed securities and support the mortgage market. He also said that the Treasury will expand its program to purchase mortgage-backed securities. He said that the cost of government intervention would reach the hundreds of billions of dollars.
"The Treasury's attempt to take the toxic debt instruments off financials' balance sheets is a pretty big step at correcting some of the problems in the credit market," said Robert Pavlik, chief investment officer at Oaktree Asset Management. He said that even after government intervention, the crisis will remain until banks resume lending to one another.
The SEC, meanwhile,
of 799 financial stocks, effective immediately. The temporary crackdown will remain in place until Oct. 2 but may be extended further. The U.K.'s financial regulator also banned short sales of 29 of its publicly traded companies. Short-selling, or making a bet that a given stock's price will fall, has been a source of heated controversy as some have speculated that short-sellers are responsible for the decline of
"I don't necessarily like it," said Pavlik of the short-selling ban, "but I think it could help the market." He said that it's not necessarily right for the government to intervene in the markets, but I can understand why it's for the greater good of the economy and the greater good of the public.
Elsewhere in the financials space, AIG said
will succeed Robert Willumstad as chairman and CEO. Willumstad was ousted by Treasury Secretary Henry Paulson as part of a government bailout package for AIG.
Stocks were further buoyed by decent earnings statements in the technology sector. After Thursday's session closed,
reported rising fiscal first-quarter profits but offered cautious revenue guidance.
Mobile device maker
posted a wider first-quarter loss but still bested Wall Street's estimates.
Looking at commodities, oil was gaining $3.07 to $100.95 a barrel. Gold was giving back $28.40 to $868.60 an ounce after surging more than $110 in the previous two days.
Longer-dated U.S. Treasury securities were declining in price. The 10-year was down 1-19/32 to yield 3.74%, and the 30-year was off 2-25/32, yielding 4.35%. The dollar was making substantial gains on the yen, but falling vs. the euro and pound.
Overseas, the FTSE in London was up 7.6%, and the DAX in Frankfurt was gaining 4.8%.
went on a tear. The Nikkei in Japan closed with a gain of 3.8%, and the Hang Seng in Hong Kong jumped 9.6%.