NEW YORK – Traders are applauding the government's latest plan to help banks remove as much as $1 trillion in bad assets from their books.
Major stock indexes jumped more than 2 percent in early Monday trading, including the Dow Jones industrial average, which rose 175 points. Financial stocks led the advance.
Stocks extended a two-week rally after the Treasury Department announced a plan to revive lending that would rely on the government's $700 billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors.
The goal is to buy toxic assets that are weighing on banks' balance sheets and are hampering banks' ability to resume more normal lending to consumers and businesses. The drop in lending has worsened and prolonged the recession.
The plan seeks to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.
"The actions that we're getting from a policy standpoint are very helpful in removing the sand from the gears," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "That is going to be good for the financials."
Citigroup Inc. jumped 17 percent, Bank of America Corp. added 17 percent. Even banks regarded as more sound posted big advances. JPMorgan Chase & Co. rose 10 percent.
In the first hour of trading, the Dow rose 175.14, or 2.4 percent, to 7,453.52.
Broader stock indicators also surged. The Standard & Poor's 500 index rose 20.03, or 2.6 percent, to 788.57, and the Nasdaq composite index rose 32.10, or 2.2 percent, to 1,489.37.
Monday's advance is bolstering a more upbeat mood on Wall Street seen in the past two weeks. Stocks began rising after troubled banks told investors they had made money in the first two months of the year and after reports on retail sales and home building came in better than expected. The Dow is coming off its first back-to-back weekly gains in close to a year.
http://news.yahoo.com/s/ap/20090323/ap_on_bi_st_ma_re/wall_street
Topic: Stocks open sharply higher on plan to aid banks (Read 417 times)