Stocks rebound after release of 'stress test' details

NEW YORK -- Investors set aside some of their worries about banks and the economy Friday after the government unveiled its methods for testing the health of banks.

Initial uncertainty about the government's "stress tests" faded and left investors to focus on better-than-expected quarterly results from Ford Motor. Positive news from American Express and Microsoft also energized the market.

Financial stocks mostly rose after the Federal Reserve said the government was prepared to rescue any of the 19 financial companies that underwent stress tests and were deemed vulnerable if the recession worsened sharply.

The market was bouncy but soon recovered in the hour after the central bank released the methods it would use to evaluate balance sheets.

"There are no major shocks in here. That's why the market's holding up well," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group. "It's been hanging over the market for the last few days."

According to preliminary calculations, the Dow rose 119.23, or 1.5%, to 8,076.29 after being up 170 after release of the stress test methods.

Broader market measures also jumped. The Standard & Poor's 500 index rose 14.30, or 1.7%, to 866.22, and the Nasdaq composite index rose 42.08, or 2.6%, to 1,694.29.

Steve Sachs, director of trading at Rydex Investments, in Rockville, Md., said market has held up well during a week in which about a quarter of the companies in the S&P 500 index have released earnings, including the major banks.

"We are looking for the signs of economic recovery," he said. "The market clearly is comfortable that it sees the signs of economic stability that it needs to see."

Sachs said he wouldn't be surprised to see some retreat in stocks after the major market gauges have surged more than 20% since the rally began March 10. Stocks are still down by more than 40% from their peak in October 2007.

Stocks jumped from the start of trading Friday after Ford's loss wasn't as bad as analysts had forecast. The No. 2 automaker used up much less cash during the first three months of the year than it did in the last quarter of 2008.