Stocks rise following Wednesday's rout
NEW YORK -- Stocks rebounded Thursday from the previous session's massive rout, but safe assets such as gold and Treasury bills still saw heavy demand as investors braced for more instability in the financial system.
In morning trading, the Dow Jones industrial average rose more than 100 points.
Following the bailout of insurer American International Group aig, the Federal Reserve and other major central banks around the world on Thursday joined forces to inject as much as $180 billion into global money markets in an attempt to keep the credit crisis from worsening. The Fed added another $55 billion in overnight loans Thursday.
But fears have not fully receded. Market participants are still trying to determine how to proceed in what is looking to be the most troubling period for the world's financial system in most investors' memory.
The big fear on Wall Street is that there are more significant financial companies to fall. Speculation is swirling about the futures of such major players as Washington Mutual wm and investment bank Morgan Stanley ms. Media reports have been saying that Wells Fargo wfc and Citigroup c are interested in a possible takeover of Washington Mutual, and that Morgan Stanley and Wachovia wb are in talks about a possible combination.
President Bush said Thursday that he shares Americans' concerns and the government will act aggressively to avert a deepening crisis.
"The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence," Bush said in two minutes of remarks delivered outside the Oval Office.
He did not specify what actions would be taken. The president was to meet with economic advisers over much of the day, and was seeing Treasury Secretary Henry Paulson at the White House later Thursday.
"Our financial markets continue to deal with serious challenges," he said. "As our recent actions demonstrate, my administration is focused on meeting these challenges."
Monday's 504-point loss in the Dow was its biggest drop since the drop following the September 2001 terror attacks. The blue-chip index is now about 24% below its Oct. 9, 2007, record close of 14,164.53.
On Wednesday, the 3-month Treasury bill — considered one of the safest short-duration assets — saw demand surge so high that its yield briefly dipped into negative territory for the first time since 1940.
In early trading Thursday, the prices for short-duration Treasurys dipped from Wednesday's levels. But the yield on the 3-month T-bill was still extremely low at 0.12% — up from 0.2% late Wednesday, but well below its yield of 1.60% just a week ago.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.44% in early Thursday trading from 3.42% late Wednesday.
Gold, another safe haven, rose further on Thursday, after posting their largest one-day price jump ever on Wednesday.
Oil is not considered as safe as gold but it, too, has been drawing investors who deem it safer than stocks.
The dollar fell against most other major currencies.
In economic data, the Labor Department reported that initial claims for unemployment benefits rose by 10,000 last week to 455,000, due primarily to Louisiana's job losses from Hurricane Gustav.
The Philadelphia Fed said its regional manufacturing report improved to a 3.8 in September from a negative 12.7 in August. It marks the first positive reading since November.
In earnings news, FedEx posted a 22% decline in quarterly earnings, as the package delivery company cut costs to offset slowing global growth. The fiscal first-quarter results came in as expected.
Overseas, Japan's Nikkei stock average dropped 2.22% to its lowest closing level in over three years. Hong Kong's Hang Seng index lost 0.03%.
Elsewhere, Russia's main stock exchanges remained mostly closed Thursday, a day after regulators suspended trading amid a dizzying plummet in share prices. The MICEX resumed limited trading; the RTS was set to reopen Friday.
In afternoon trading in Europe, Britain's FTSE 100 rose 0.44%, Germany's DAX index rose 1.07%, and France's CAC-40 rose 1.22%.
Analysts said the gains in European markets were largely the result of the move by the central banks.