U.S. stocks gained for the first time in four weeks on speculation the government will take steps to avert a lending crisis, helping the market overcome increasing home-loan and hedge fund losses.
The Standard & Poor's 500 Index began the week with the steepest two-day advance in four years, buoyed by a bullish economic outlook from the Federal Reserve. The benchmark was little changed yesterday after the Fed pumped the most money into the banking system since the September 2001 terror attacks and pledged more ``as necessary'' to bolster investor confidence.
``Someone needs to step in and create some stability, and we're seeing the Fed do that,'' said Jason Graybill, who helps manage $750 million at Abner Herrman & Brock Inc. in Jersey City, New Jersey.
The S&P 500 advanced 1.4 percent to 1453.64, recovering from the biggest three-week loss since February 2003. The Dow Jones Industrial Average rose 0.4 percent to 13,239.54. The Nasdaq Composite Index climbed 1.3 percent to 2544.89.
The yield on the benchmark 10-year U.S. Treasury note rose 0.11 percentage point to 4.80 percent this week as the Fed joined central banks in Europe, Japan, Australia and Canada in attempting to prevent a credit crunch.
Stocks tumbled on Aug. 9, with the S&P 500 slumping the most since February, as subprime mortgage contagion and hedge fund losses halted a three-day rally.
Manic, Depressive, Manic
Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. gained for the week, even after brokerage shares suffered the biggest one-day decline of the almost five-year bull market. Citigroup rose 2.8 percent to $47, JPMorgan climbed 1.4 percent to $44.25 and Goldman advanced 0.5 percent to $180.50.
After the close of trading yesterday, people familiar with Goldman's $8 billion Global Alpha hedge fund said it has lost 26 percent so far this year.
Quantitative hedge funds, including those run by Goldman, Highbridge Capital Management LLC and Tykhe Capital LLC, have lost money as credit spreads widen and volatility jumps, rendering useless their statistical investment models.
``Our market is rapidly swinging from manic to depressive and back to manic in nanosecond moves with each headline acting as a trigger,'' said Frederic Dickson, who manages $17 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Fannie Mae Advances
The Chicago Board Options Exchange Volatility Index gained 12 percent to 28.30, the highest since April 2003. Higher readings in the VIX, derived from prices paid for S&P 500 options, indicate traders expect stocks to have bigger price swings. The VIX has risen five straight weeks.
Shares of financial companies in the S&P 500 gained 3.7 percent, the most among 10 industries.
Fannie Mae rose 17 percent to $66.46 for the steepest weekly gain in the S&P 500. Freddie Mac added 11 percent to $61.95. Investors speculated that the regulator for the two largest U.S. home-loan companies would lift a cap on the home loan assets they can own, helping pour more money into the mortgage market.
After the close of trading yesterday, the Office of Federal Housing Enterprise Oversight rejected requests by the government-chartered companies. ``We are not authorizing any significant changes at this time,'' the regulator said.
Home Depot Inc. fell for the fourth consecutive week, losing 0.8 percent to $35.92. The world's largest home- improvement retailer may have to accept a lower price for the contractor-supply unit it agreed to sell to buyout firms for $10.3 billion, forcing it to scale back a stock repurchase plan.
Merrill Lynch Gains
Merrill Lynch & Co. added 5.8 percent to $74.12. UBS AG raised its recommendation for the stock to ``buy'' from ``neutral'' and said any possible losses in Merrill's credit business have already been priced into the stock.
Polo Ralph Lauren Corp. fell 11 percent to $77.40, the biggest drop among S&P 500 members. The designer of Chaps and Club Monaco clothing cut its annual forecast for the second time this year. The stock is unchanged for the year.
Investors will get clues next week on the health of the U.S. economy. Retail sales rose last month, signaling that a deepening real-estate slump and elevated food and fuel costs are slowing rather than stopping consumers, economists said before a government report.
Purchases rose 0.2 percent after dropping 0.9 percent in May, according to the median estimate in a Bloomberg News survey before a Commerce Department report on Aug. 13. Other reports may show prices increased in July, according to the survey.
The Standard & Poor's 500 Index began the week with the steepest two-day advance in four years, buoyed by a bullish economic outlook from the Federal Reserve. The benchmark was little changed yesterday after the Fed pumped the most money into the banking system since the September 2001 terror attacks and pledged more ``as necessary'' to bolster investor confidence.
``Someone needs to step in and create some stability, and we're seeing the Fed do that,'' said Jason Graybill, who helps manage $750 million at Abner Herrman & Brock Inc. in Jersey City, New Jersey.
The S&P 500 advanced 1.4 percent to 1453.64, recovering from the biggest three-week loss since February 2003. The Dow Jones Industrial Average rose 0.4 percent to 13,239.54. The Nasdaq Composite Index climbed 1.3 percent to 2544.89.
The yield on the benchmark 10-year U.S. Treasury note rose 0.11 percentage point to 4.80 percent this week as the Fed joined central banks in Europe, Japan, Australia and Canada in attempting to prevent a credit crunch.
Stocks tumbled on Aug. 9, with the S&P 500 slumping the most since February, as subprime mortgage contagion and hedge fund losses halted a three-day rally.
Manic, Depressive, Manic
Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. gained for the week, even after brokerage shares suffered the biggest one-day decline of the almost five-year bull market. Citigroup rose 2.8 percent to $47, JPMorgan climbed 1.4 percent to $44.25 and Goldman advanced 0.5 percent to $180.50.
After the close of trading yesterday, people familiar with Goldman's $8 billion Global Alpha hedge fund said it has lost 26 percent so far this year.
Quantitative hedge funds, including those run by Goldman, Highbridge Capital Management LLC and Tykhe Capital LLC, have lost money as credit spreads widen and volatility jumps, rendering useless their statistical investment models.
``Our market is rapidly swinging from manic to depressive and back to manic in nanosecond moves with each headline acting as a trigger,'' said Frederic Dickson, who manages $17 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Fannie Mae Advances
The Chicago Board Options Exchange Volatility Index gained 12 percent to 28.30, the highest since April 2003. Higher readings in the VIX, derived from prices paid for S&P 500 options, indicate traders expect stocks to have bigger price swings. The VIX has risen five straight weeks.
Shares of financial companies in the S&P 500 gained 3.7 percent, the most among 10 industries.
Fannie Mae rose 17 percent to $66.46 for the steepest weekly gain in the S&P 500. Freddie Mac added 11 percent to $61.95. Investors speculated that the regulator for the two largest U.S. home-loan companies would lift a cap on the home loan assets they can own, helping pour more money into the mortgage market.
After the close of trading yesterday, the Office of Federal Housing Enterprise Oversight rejected requests by the government-chartered companies. ``We are not authorizing any significant changes at this time,'' the regulator said.
Home Depot Inc. fell for the fourth consecutive week, losing 0.8 percent to $35.92. The world's largest home- improvement retailer may have to accept a lower price for the contractor-supply unit it agreed to sell to buyout firms for $10.3 billion, forcing it to scale back a stock repurchase plan.
Merrill Lynch Gains
Merrill Lynch & Co. added 5.8 percent to $74.12. UBS AG raised its recommendation for the stock to ``buy'' from ``neutral'' and said any possible losses in Merrill's credit business have already been priced into the stock.
Polo Ralph Lauren Corp. fell 11 percent to $77.40, the biggest drop among S&P 500 members. The designer of Chaps and Club Monaco clothing cut its annual forecast for the second time this year. The stock is unchanged for the year.
Investors will get clues next week on the health of the U.S. economy. Retail sales rose last month, signaling that a deepening real-estate slump and elevated food and fuel costs are slowing rather than stopping consumers, economists said before a government report.
Purchases rose 0.2 percent after dropping 0.9 percent in May, according to the median estimate in a Bloomberg News survey before a Commerce Department report on Aug. 13. Other reports may show prices increased in July, according to the survey.
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