Stocks rally on plan to help banks, home sales
NEW YORK -- Stocks rallied Monday as details emerged about the government's plan to help banks remove as much as $1 trillion in bad assets from their books.
Major stock indexes jumped more than 2%, including the Dow Jones industrial average, which rose 200 points. Financial stocks led the advance.
The rally also got a boost from Monday's report that sales of existing homes rose 5.1% in February from January, biggest one-month rise since 2003.
The Treasury Department announced a plan to revive lending that would rely on $100 billion of the government's $700 billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors.
The goal is to buy toxic assets weighing on banks' balance sheets. The bad loans are crimping banks' ability to resume more normal lending to consumers and businesses. The drop in lending is hurting economic activity and making the current recession more prolonged and severe.
The plan seeks to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.
Investors have been more upbeat in the past two weeks after troubled banks told investors they had made money in the first two months of the year and after reports on retail sales and home building came in better than expected. The Dow is coming off its first back-to-back weekly gains in close to a year.
As stocks rose on the news, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.65% from 2.64% late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.22% from 0.19% Friday.
Light, sweet crude rose 55 cents to $52.61 a barrel in electronic trading on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices fell.
In corporate news, Daimler opened nearly 7% higher on Monday following the announcement that Abu Dhabi-based Aabar Investments would buy a stake in the automaker best known for its Mercedes-Benz brand.
