Wall Street Soars on Bank Relief Measures
Updated from 9:13 a.m. EDT
Stocks in the U.S. rocketed higher at Monday's open, as governments worldwide initiated massive emergency aid packages for struggling banks.
The
Dow Jones Industrial Average
soared 390 points to 8841, and the
S&P 500
jumped 36 points to 935. The
Nasdaq
was better by 79 points at 1728.
During the previous week, the three major indices took a severe lashing as investors worried that stagnant credit markets weren't responding to curative efforts by the U.S. and other governments. The Dow and the S&P each dropped 18%, and the Nasdaq fell 15%.
The cost of borrowing appeared to relax slightly, as three-month dollar Libor fell 6.6 basis points to 4.75%. Overnight Libor rates were not assessed as U.S. bond markets were closed in observance of Columbus Day.
Over the weekend, central banks across the globe were initiating policies to offer liquidity to banks and bolster lending markets.
In the U.S., Interim Assistant Secretary for Financial Stability Neel Kashkari said in a statement Monday that the Treasury Department had enlisted law firm Simpson Thatcher to advise it on a plan to buy equity positions as a measure in its $700 billion relief package for financial firms.
The U.K. announced a plan to inject capital into three of its struggling banks.
Royal Bank of Scotland
(RBS) - Get Report
,
Lloyds
(LYG) - Get Report
and
HBOS
will get up to $63 billion in government support, the
said.
Australia said it would guarantee all of its banks' deposits and international debt. The United Arab Emirates said it would guarantee its domestic bank deposits. France and Italy are expected to detail their own plans later Monday. Germany, meanwhile, was preparing to expand a bailout package for its banks to $680 billion.
According to a report by
Bloomberg
,
Treasury Secretary Henry Paulson
was looking into a U.S. program to guarantee debt issued by domestic banks following the significant intervention by European governments.
The
Federal Reserve
said it would offer unlimited dollar funding to swap facilities with several European central banks to meet increasing demand.
In company news, mergers and equity investments were dominating the headlines. Japanese bank
Mitsubishi UFJ
(MTU)
closed a deal with
(MS) - Get Report
to buy a 21% stake in the U.S. bank holding company.
Meanwhile,
Banco Santander
( STD) said it may acquire all of troubled U.S. thrift
( SOV).
The Fed said it had cleared the way for
Wells Fargo's
(WFC) - Get Report
purchase of
Wachovia
(WB) - Get Report
.
Outside the financials,
General Motors
(GM) - Get Report
was in discussions with
Cerberus Capital Management
to buy
Chrysler's
automotive operations, according to published reports. Cerberus owns an 80% stake in
.
In analyst actions, Goldman Sachs predicted that the S&P 500 would climb 11% to reach 1000 at the end of the year. There's a high probability of a rally, Goldman said, but the rebound would not mark the beginning of a new bull market.
Merrill Lynch also upgraded Royal Bank of Scotland and German bank
Commerzbank
to buy from neutral.
Barclays
(BCS) - Get Report
,
Credit Suisse
(CS) - Get Report
and
Allied Irish Bank
(AIB)
got bumped to neutral from underperform. Merrill said it revised its ratings on the banks based on valuation.
Among technology shares, Friedman Billings reduced price targets on a wide array of technology companies, including
Microsoft
(MSFT) - Get Report
,
McAfee
( MFE) and
Adobe Systems
(ADBE) - Get Report
.
As for commodities, crude oil was up $4.49 at $82.19 a barrel, and gold was lower by $3.50 at $855.50.
The market for U.S. Treasury securities was closed. The dollar was falling substantially vs. the euro and pound but rising against the yen.
Europe's exchanges, such as the FTSE in London and the Dax in Frankfurt, were trading higher. In
, Hong Kong's Hang Seng gained 10%. Japan's Nikkei was closed for a holiday.
