Stocks Waver on More Credit Write-Downs
Wednesday November 14, 12:36 pm ET
By Madlen Read, AP Business Writer
Stocks Wobble Amid More News of Credit Write-Downs; Government Reports Tame Inflation Data
NEW YORK (AP) -- Wall Street moved tentatively higher Wednesday as investors, hopeful that the worst of the credit crisis is over, wavered on whether to extend Tuesday's huge advance.
The stock market was relieved after Bear Stearns Cos. Chief Financial Officer Sam Molinaro said Wednesday the investment bank's leveraged finance business is improving. He said the company expects to take a $1.2 billion writedown during the fourth quarter, which eased worries of even higher losses.
Wednesday's news followed reassuring comments from Goldman Sachs Group Inc.'s chief executive about its own credit exposure that sent stocks climbing and helped propel the Dow Jones industrials up nearly 320 points.
But there are signs that tight credit is not something that is going away anytime soon. Britain's HSBC Holdings PLC did say Wednesday it would have to write down a further $3.4 billion from its U.S. business during the third quarter because of exposure to subprime loans.
"At the very short-term, some fear has diminished. But I don't know if the fear has been taken away," said Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, Pa.
And meanwhile, after plunging on Tuesday, oil prices resumed their climb Wednesday, raising concerns that inflation risks could prevent the Federal Reserve from lowering rates to calm the shaky market.
The Dow rose 26.26, or 0.20 percent, to 13,333.35, after bobbing in and out of positive territory.
Broader stock indicators were mixed. The Standard & Poor's 500 index rose 5.49, or 0.37 percent, to 1,486.54, while the Nasdaq composite index fell 0.06 to 2,673.59.
Treasury bonds dipped. The 10-year Treasury note's yield, which moves in the opposite direction of its price, rose to 4.27 percent, up from 4.26 percent, the same as late Tuesday.
Gold prices rose, while the dollar was mixed against rival currencies.
The Labor Department reported wholesale prices registered a slight gain in October, held down by a drop in energy costs. The moderation in inflation could be temporary, however, with oil prices surging to fresh records in early November.
A barrel of light sweet crude rose $2.24 to $93.41 on the New York Mercantile Exchange, after plunging Tuesday by $3.45.
And while the wholesale price report suggests the Fed could afford to lower rates further when it meets on Dec. 11 to calm the shaky markets, the central bank did indicate after its Oct. 30-31 meeting -- where it cut rates by a quarter-point -- that it was satisfied with the current state of the economy and still concerned about rising inflation.
Bear Stearns Cos. rose $4.67, or 4.6 percent, to $105.54, after its CFO's encouraging comments. Other financial stocks -- which have lagged other sectors this year -- rose as well. Citigroup rose 92 cents, or 2.6 percent, to $36.82; Merrill Lynch & Co. rose 95 cents to $57.90; and Lehman Brothers Holdings rose $1.21 to $64.70.
Meanwhile, the Commerce Department reported retail sales managed a small increase in October as consumers struggled to cope with a steep slump in housing, tighter credit conditions and soaring energy costs. It was the weakest showing since August and represented a significant slowdown from September sales.
Advancing issues slightly outnumbered decliners on the New York Stock Exchange, where volume came to 674.8 million shares.
The Russell 2000 index of smaller companies fell 1.54, or 0.20 percent, to 787.60.
About a half hour before the market's open, The Associated Press reported Dow futures shot up 413 points, or about 3.16 percent. The index was later corrected to a gain of about 67 points, or 0.50 percent. Data provider Thomson Financial said it was investigating the discrepancy, which was likely the result of a software glitch.
Overseas, Japan's Nikkei stock average closed up 2.47 percent and Hong Kong's Hang Seng index rose 4.90 percent. I Europe, Britain's FTSE 100 added 1.10 percent, Germany's DAX index rose 0.07 percent, while France's CAC-40 rose 1.35 percent.
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