Stocks climb as JPMorgan raises bid
EmptyNEW YORK -- Wall Street extended its big advance Monday as investors applauded a new agreement that will give Bear Stearns Cos. shareholders five times the payout than was outlined in a JPMorgan Chase & Co. buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report. The Dow Jones industrial average jumped about 200 points.
Stocks rose after JPMorgan said the company will boost its offer to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Bear Stearns shares jumped $5.84, or 98%, to $11.80, while JPMorgan rose $1.19, or 2.6%, to $47.16.
Beyond the troubles of the financials, Wall Street was examining the housing sector -- the root of much of investors' current angst. A real estate trade group said sales of existing homes rose rather than declined in February, as had been expected.
The Fed's move and even the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.
"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in a buy it at some level,"' said Charlie Smith, chief investment officer at Fort Pitt Capital Group.
In late morning trading, the Dow rose 199.61, or 1.61%, to 12,560.93 after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.
Broader stock indicators also rose. The Standard & Poor's 500 index rose 20.76, or 1.56%, to 1,350.27, and the Nasdaq composite index rose 54.03, or 2.39%, to 2,312.14.
The Russell 2000 index of smaller companies rose 18.15, or 2.66%, to 699.57.
Monday's gains follow a volatile but ultimately strong week for the markets. The Dow and the S&P each showed gains of more than 3% for the week, while the Nasdaq advanced more than 2%.
Bond prices fell sharply. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.48% from 3.34% late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell 39 cents to $101.45 per barrel on the New York Mercantile Exchange.
The housing sector, which has offered a steady drumbeat of mostly negative news in recent months, gave investors a welcome lift. The National Association of Realtors said sales of existing homes rose by 2.9% in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and Wall Street had expected a slight decline. Still, the median home price fell by the largest amount on record.
Smith said further readings on the housing sector, including a report on home prices due Tuesday, could help determine whether Wall Street's enthusiasm will continue or prove short-lived. Further weakness in housing, he said, could mean banks will continue to struggle with a locked-up credit market.
Still, the Fed's move to broker the Bear Stearns buyout has allowed investors the sense that not all the debt guaranteed by mortgages is "nuclear waste." It will be some time before Wall Street knows whether the write-downs on mortgages already taken will be sufficient.
"The fact that the Fed is willing to come in and buy it at some level makes people think 'OK, it's not zero,"' Smith said, referring to the troubled debt.
Beyond housing, a report from Tiffany & Co. helped assuage some concerns about the health of high-end consumers. The jeweler said loans it made to a diamond company weighed on its fourth-quarter profit, but that earnings excluding items were in line with Wall Street's expectations. Tiffany jumped $5.19, or 13%, to $43.79.
Walgreen Co. rose $1.95, or 5.3%, to $38.73 after the drugstore chain said its second-quarter earnings rose 5% as it controlled expenses to offset slower sales growth.
Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where volume came to 490.2 million shares.
Overseas, Japan's Nikkei stock average closed down 0.02%. Markets in Europe and in Hong Kong were closed for Easter Monday.