Stocks jump as fears ebb about bank 'stress tests'
NEW YORK -- Investors found another reason to buy up stocks Wednesday as reports indicated balance sheets at the nation's biggest banks might not be as frayed as some investors had feared.
The news came a day ahead of the formal release of the government's "stress tests." Investors relieved to have some answers scooped up shares of most banks, even those expected to have to raise capital.
"To me, this rally has been more a recognition that maybe the end of the world is not at hand," said Philip S. Dow, managing director of equity strategy at RBC Wealth Management.
American Express, JPMorgan Chase and Bank of New York Mellon will not be asked to raise more capital when federal officials announce the test results Thursday afternoon, but Regions Financial will need to bolster its reserves, according to people briefed on the results. Those people requested anonymity because they were not authorized to discuss the tests.
Citigroup will need to raise about $5 billion, according to a government official who requested anonymity because he was not authorized to discuss the matter. Earlier news reports put that number closer to $10 billion.
Bank of America and Wells Fargo also will be asked to raise capital, people familiar with the matter said earlier this week.
The Dow Jones industrial average rose 101.63, or 1.2%, to 8,512.28. The blue chips closed above the 8,500 mark for the first time since Jan. 9, leaving the Dow down only 3% for 2009.
The Standard & Poor's 500 index rose 15.73, or 1.7%, to 919.53. The gains pushed the index higher for the year after a rally on Monday helped erase its losses from 2009.
The Nasdaq composite index rose 4.98, or 0.3%, to 1,759.10.
Stocks also rose after the ADP National Employment Report was released. The report is an unofficial gauge of the labor market and said that private sector employment fell 491,000 last month, a huge improvement from the 708,000 jobs lost in March. The ADP report said unemployment is likely to rise for several more months, but at a slower rate.
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