Stocks rise on Merrill Lynch report
EmptyNEW YORK -- Stocks jumped Friday following a better-than-expected rise in profits at Research in Motion Ltd. and on word that Merrill Lynch might have lined up a big cash infusion from a Singapore fund.
The developments seemed to allay investor fears that economic growth would succumb to tightness in the credit markets. Adding to the measure of relief some investors felt, the Federal Reserve said after the opening bell that it would continue with its special biweekly auctions for banks as long as was necessary to relieve strains in the short-term debt market.
The announcements came as the New York Stock Exchange set a record for volume in the first half hour of trading during what is known as "quadruple witching." It marks the simultaneous expiration of contracts for stock index futures, stock index options, stock options and single stock futures and often leads to heavy trading near the start and end of trading.
Stocks rose for the second day after Research in Motion said late Thursday that its fiscal third-quarter profit more than doubled on strong demand for its BlackBerry smart phones. The results gave Wall Street hope that the technology sector has room to expand and that consumers and businesses are still spending.
Adding to investors' upbeat mood, The Wall Street Journal reported that Merrill Lynch & Co., facing hefty writedowns due to losing bets on subprime mortgages, may get a capital infusion of as much as $5 billion. The money is expected to come from Singapore state-owned investment agency Temasek Holdings Pte. Ltd., a fund that in late July said it would buy a 1.77% stake in Barclays PLC for $2 billion.
Sovereign funds have been providing troubled U.S. and European banks with much-needed cash. Over the past month, the Abu Dhabi Investment Authority bought a stake in Citigroup Inc. for $7.5 billion; the Government of Singapore Investment Corp. invested $9.75 billion in UBS AG; and this week China Investment Corp. paid $5 billion for a stake in Morgan Stanley.
Gregory Pai, managing director with Paradigm Asset Management, contends news from companies such as Research in Motion, the Fed's willingness to keep adding liquidity to the banking system and news of further cash injections to big U.S. banks has given investors a sense that not all parts of the economy are in trouble. He said any signs of resurgence are welcome as the economy will likely continue to struggle with weakness in the housing sector.
"I think that whether by design by the gods above or by coincidence, we're seeing certain things happen that will give us a good enough cushion to ride through the short term and focus on the bigger problem, which is housing," he said.
In midday trading, the Dow Jones industrial average rose 158.59, or 1.20%, to 13,404.23.
Broader stock indicators also rose. The Standard & Poor's 500 index gained 17.28, or 1.18%, to 1,477.40, and the Nasdaq composite index advanced 33.37, or 1.26%, to 2,674.23.
Advancing issues outnumbered decliners by about 7 to 3 on the New York Stock Exchange, where volume came to 1.17 billion shares.
Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, surged to 4.13% from 4.06% late Thursday. The dollar was mostly lower against other major currencies, while gold prices fell.
Wall Street appeared to be attempting a late-December rally with six trading days left in the year, but no doubt some skepticism remains about whether investors can pull off a so-called Santa Claus rally.
Companies like Research in Motion have reported solid sales growth, but others have had a harder time staying profitable as U.S. consumers struggle with sinking home prices and high energy and food costs. Research in Motion jumped $12.82, or 12%, to $119.81.
Electronics retailer Circuit City Stores Inc. fell $1.62, or 24%, to $5.04 after posting a wider-than-expected loss for the most recent quarter due to lower extended warranty sales and restructuring costs.
Meanwhile, a Commerce Department report on personal spending brought investors mixed news. Spending rose by 1.1% in November, the largest amount in 3 1/2 years. But the Fed's preferred inflation measure -- the year-over-year core personal consumption expenditures deflator -- rose 2.2%. That's above the Fed's comfort level of 1% to 2%, and could make it harder for the central bank to justify further rate cuts aimed at spurring economic growth.
Light, sweet crude rose $1.41 to $92.47 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies rose 13.59, or 1.77%, to 781.13.
Overseas, Japan's Nikkei stock average rose 1.50%, and Hong Kong's Hang Seng index added 2.26%. In afternoon trading, Britain's FTSE 100 gained 1.33%, Germany's DAX index advanced 1.50% and France's CAC-40 lifted 1.57%.