Stocks higher on reports of CIT rescue
NEW YORK -- Stocks rose Monday as investors welcomed media reports that commercial lender CIT Group has a deal with key bondholders that will help it avoid bankruptcy.
Stocks are following world markets higher after reports in The New York Times and The Wall Street Journal said CIT's board approved a deal late Sunday with major bondholders to receive $3 billion in emergency funding. Both the Times and the Journal cited people familiar with the matter. CIT representatives could not immediately be reached for comment.
The money will give the troubled company time to restructure and pay down billions of dollars in debt due later this year.
Worries about the fate of the debt-laden company have plagued investors over the past week, as CIT's problems mounted and negotiations with federal regulators for bailout funds fell through. Its failure would have been a big blow to investor confidence and would have hurt industries like retailing, which has suppliers who reply on CIT for financing.
Investors are also focused on the next wave of earnings reports coming this week. On Monday, companies such as Boston Scientific BSX and Texas InstrumentsTXN are set to issue results.
A string of good earnings news sent market indicators up about 7% last week, giving both the Dow Jones industrials and the Standard & Poor's 500 index their biggest weekly gains since early March, when the market's spring rally began.
The huge advance came after a month-long slide in stocks that was driven by reports showing the economy was not healing as quickly as hoped. But solid quarterly results and outlooks from big name companies like Goldman SachsGS, IntelINTC and IBMIBM gave investors fresh hope that the nearly two-year-long recession is coming to an end. The market is hoping the better-than-expected reports continue.
Among the earnings news Monday, toy maker HasbroHAS said its second-quarter profit rose 5%, beating expectations, as strong U.S. revenue offset international sales hurt by the stronger dollar.
Meanwhile, oilfield services company HalliburtonHAL said its second-quarter profit tumbled 48% amid sluggish exploration and production activity.
The CIT news and optimism over better earnings reports stoked investors' appetite for risk. Investors moved out of safe-haven assets like U.S. Treasurys and the dollar, and into riskier bets like commodities.
Oil prices jumped $1.12 to $64.68 in electronic trading on the New York Mercantile Exchange. Prices for gold, silver and copper also rose.
Bond prices tumbled. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.70% from 3.66% late Friday.
And the dollar fell against other major currencies.
Except for a private sector group's report on economic activity, there is little economic data on tap for Monday. Economists are expecting the Conference Board's index of leading economic indicators to have risen 0.4% in June, which would mark the third straight monthly advance. The report is to be released at 10 a.m. ET.
Overseas, Hong Kong's Hang Seng index jumped 3.7%. In afternoon trading, Britain's FTSE 100 was up 1.4%, Germany's DAX index rose 1.3%, and France's CAC-40 gained 1.5%. Japanese financial markets were closed for a holiday.