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Positive Credit News Helps Pump Up Stocks

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The Associated Press

Published: September 14, 2007

NEW YORK - Stocks advanced solidly Thursday, led by strong gains among the blue chips and mortgage lender Countrywide Financial Corp., which signaled a possible thawing in the credit markets with the announcement it had lined up additional financing.

The Dow Jones industrial average rose by more than 130 points after General Motors Corp. surged 10 percent amid reports that talks between the automaker and workers over the thorny issue of health care costs might have been fruitful. Meanwhile, McDonald's Corp. closed at an all-time high after boosting its dividend, and bond prices fell sharply.

Investors, who have been nervous about the economic fallout from rising mortgage defaults and tightness in the credit markets, were relieved to hear that Countrywide, the nation's largest mortgage lender, secured $12 billion in credit.

'It appears that this credit crunch may not be as bad as some people thought,' said Charles Norton, principal and portfolio manager at GNICapital, crediting the Countrywide news with lifting overall investor sentiment.

The Dow rose 133.23, or 1.00 percent, to 13,424.88.

Broader stock indicators also advanced, though more modestly. The Standard & Poor's 500 index rose 12.39, or 0.84 percent, to 1,483.95, and the technology-heavy Nasdaq composite index rose 8.99, or 0.35 percent, to 2,601.06.

Government bond prices fell sharply as stocks advanced and investors grew more confident they could move out of the safest bets. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 4.48 percent from 4.41 percent late Wednesday.

'Some other financings have been done. There have been some corporate bond issues,' Norton said, listing some of the reasons beyond the Countrywide news for a slight easing in concerns about credit.

He warned that further examples of credit distress are likely to pop up, but he added that much of the intransigence in the credit markets could ease as fear dissipates.

Wall Street shrugged off a record close in crude oil prices, which edged up 18 cents to $80.09 per barrel on the New York Mercantile Exchange. It was the first time oil has closed above $80.

Gold prices fell for a second day as the U.S. dollar came off an all-time low against the euro.

Economic news, though not commanding Wall Street's attention as did the credit markets and some corporate news, nevertheless appeared to help boost the mood on Wall Street. The Federal Reserve reported Thursday afternoon that the outstanding volume of commercial paper fell by $8.2 billion to $1.917 trillion, the fifth consecutive week it has fallen. The decline signals the corporate short-term commercial paper market could be stabilizing. Commercial paper comprises bonds issued by companies as a way for them to get cash quickly.

The Labor Department reported claims for unemployment benefits rose last week - the sixth increase in seven weeks, but by less than analysts expected. Low unemployment, at 4.6 percent, has been one of the economy's strengths.

The rise in jobless claims came after last week's reading on August payrolls, which declined for the first time in four years and sent stocks plummeting amid worries that credit tightness and market turmoil had hit the labor market. Thursday's report appeared to assuage some concerns.

Advancing issues outnumbered decliners by about 3-to-2 on the New York Stock Exchange, where consolidated volume came to 2.87 billion shares compared with volume of 2.90 billion Wednesday.

The Russell 2000 index of smaller companies rose 2.45, or 0.31 percent, to 780.35.

In markets abroad, Britain's FTSE 100 added 0.91 percent, Germany's DAX index rose 0.84 percent, and France's CAC-40 rose 1.05 percent. In Asia, Japan's Nikkei stock average ended up 0.15 percent and Hong Kong's Hang Seng Index rose 0.93 percent.

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