U.S. stocks rose as growing expectations that lawmakers will salvage a $700 billion bank- rescue package helped the Standard & Poor's 500 Index recover more than a third of yesterday's 8.8 percent plunge.
JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. jumped more than 10 percent as President George W. Bush urged the passage of bailout legislation and congressional leaders vowed to resume work on the bill after its defeat spurred the S&P 500's biggest decline in two decades. Hess Corp. and Schlumberger Ltd. rose more than 6 percent as optimism about the plan helped oil rebound from a $10-a-barrel drop. Even with the gains, the S&P 500 is poised for its worst September since 2002.
``The market appears hopeful something will happen,'' said John Carey, a Boston-based money manager at Pioneer Investment Management, which oversees about $300 billion. ``There's the thought Congress will come back to this bailout proposal. That's the expectation. The market debacle yesterday seems to have gotten people's attention in Washington.''
The S&P 500 rose 35.77 points, or 3.2 percent, to 1,142.16 at 12:42 p.m. in New York. The Dow Jones Industrial Average gained 267.69, or 2.6 percent, to 10,633.14 after falling a record 777.68 points yesterday. The Nasdaq Composite Index added 3.3 percent to 2,048.5. European stocks rose, while Asian shares declined. Government bonds in the U.S. and Europe fell. The dollar climbed the most against the euro since the shared currency's 1999 introduction.
About 531 million shares changed hands on the floor of the New York Stock Exchange, 17 percent more than at the same time a week ago. Two stocks climbed for each that fell on the Big Board.
`Black Monday'
Speculation the rescue plan will be revived overshadowed the biggest-ever jump in the cost of borrowing dollars overnight. More than $1 trillion in market value was erased yesterday in the worst day for stocks since the ``Black Monday'' crash of 1987 after the House of Representatives voted down the plan designed to rid financial institutions of bad loans.
The S&P 500 has declined 11 percent in September and the Dow average has lost 7.7 percent. The Nasdaq is down 13 percent. The S&P 500 has retreated 11 percent since the end of June for its fourth-straight quarterly decline, the longest stretch since 2001. The Dow has slipped 6.1 percent and the Nasdaq is down 11 percent.
The MSCI World Index of 23 developed nations has dropped 12 percent this month as almost $600 billion of credit losses and writedowns at financial institutions worldwide prompted banks to hoard cash, forced Lehman Brothers Holdings Inc. into bankruptcy and spurred government seizures of American International Group Inc. and the U.K.'s Bradford & Bingley Plc.
Valuation Drops
Financial companies in the S&P 500 this month traded at 1.1 times their book value, the lowest valuation since Bloomberg began tracking the data in 1995. Commercial banks in the gauge trade at 0.8 times book value, also a 13-year low.
JPMorgan, the biggest U.S. bank by deposits, climbed 12 percent to $45.97. Citigroup rose 15 percent to $20.44. Bank of America surged 11 percent to $33.47. Goldman Sachs Group Inc. increased 4.6 percent to $126.21 and Morgan Stanley gained 12 percent to $23.50.
Bush said yesterday's defeat of the plan ``is not the end of the legislative process'' and failure by Congress to act would cause ``painful and lasting'' damage to the economy.
Christopher Dodd, chairman of the Senate Banking Committee, said senators may deal with the bill as early as tomorrow. Democratic presidential candidate Barack Obama called for calm after the House vote, saying the plan ``will get done.'' Republican nominee John McCain urged lawmakers to ``go back to the drawing board'' and come up with legislation that will pass.
Regionals Rebound
The S&P 500 Regional Banks Index of 12 stocks climbed 11 percent after plunging 24 percent yesterday, its biggest tumble since the gauge was created in 2003.
Sovereign Bancorp, which plummeted 72 percent yesterday, recovered 71 percent to $3.99. National City Corp., Ohio's largest bank, climbed 38 percent after losing 63 percent yesterday.
The London interbank offered rate, or Libor, that banks charge each other for overnight loans jumped 431 basis points to an all-time high of 6.88 percent, the British Bankers' Association said today.
Hess, the fifth-biggest U.S. oil company, added 6.8 percent to $81.26. Schlumberger, the largest oilfield-services contractor, climbed 6.1 percent to $78.25. Crude for November delivery rose $1.96, or 2 percent, to $98.33 a barrel on speculation that new action on the rescue plan may avert an economic slowdown that would curb demand.
Microsoft, Schering-Plough
Officials from Microsoft Corp. to Office Depot Inc. and Schering-Plough Corp. said the government's failure to bail out the U.S. banking industry put the entire economy at risk unless a deal comes soon. They called on lawmakers to put aside partisan differences and work to restore credit supplies and confidence to the financial markets.
Microsoft, the world's biggest software maker, added 3.3 percent to $25.83. Schering-Plough, the Kenilworth, New Jersey- based drugmaker, rose 1.3 percent to $17.74. Office Depot, the second-largest office-supplies company, gained 1.8 percent to $5.78.
Dr Pepper Snapple Group Inc. advanced 6.7 percent to $25.91. The drinks maker spun off by Cadbury Plc this year was picked to replace Wm. Wrigley Jr. Co. in the S&P 500.
The benchmark index for U.S. stock options slid 12 percent to 41.20 after closing yesterday at a record 46.72. The VIX, as the measure is known, is considered the market's ``fear gauge'' because it tends to rise as stocks fall.
Dow Theory
Transportation stocks are signaling U.S. shares may be poised for more losses, according to Dow Theory, which holds that the 30-stock industrial average takes cues from the Dow Jones Transportation Average. The gauge of companies such as FedEx Corp. and Ryder Systems Inc. slid to the lowest level since March 17 yesterday, suggesting the industrials' plunge won't mark its bottom, some investors said.
Europe's Dow Jones Stoxx 600 Index added 1.8 percent today as Dexia SA, the world's biggest lender to local governments, climbed 6.1 percent on a 6.4 billion-euro ($9.2 billion) state- backed rescue.
Anglo Irish Bank Corp. Plc rallied 67 percent after Ireland's government said it will guarantee bank deposits and debts for two years, seeking to restore confidence in the country's financial industry.
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