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Stocks Rise On GM Pact, Buzz Over Bear Stearns

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The Associated Press

Published: September 27, 2007

NEW YORK - Stocks rose soundly Wednesday after word that some of the problems dogging big companies such as General Motors Corp. and Bear Stearns Cos. could be on the mend.

GM, one of the 30 stocks that makes up the Dow Jones industrial average, led the market higher from the outset with news it had struck a tentative contract agreement with the United Auto Workers that could allow the company to shed some of its burdensome healthcare costs.

Although stocks held on to gains throughout the session, rumors that Bear Stearns would sell a stake in the company took on new urgency in the final hour of trading with a report that billionaire investor Warren Buffett was a potential suitor.

'Certainly it's good to have problems that have been overhanging Bear Stearns off the table, if that can be done. That should help the financials,' said William Rutherford, president of Rutherford Investment Management in Portland, Ore., referring to the recent failure of two Bear Stearns hedge funds.

'It takes a lot of risk out of Bear Stearns stock. It doesn't mean that the fears that investors had yesterday were misplaced. It just means there is a new piece of information to be considered,' he said of any interest Buffett might show.
Bear Stearns was higher during the session amid rumors it would sell off a piece of the company. The nation's fifth-largest investment bank then doubled its gains after The New York Times reported Buffett, among others, had shown interest in a minority stake in the company. The stock finished up $8.76, or 7.7 percent, at $123.

The GM and Bear Stearns news lifted investor sentiment, sending the Dow up 99.50, or 0.72 percent, to 13,878.15.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 8.21, or 0.54 percent, to 1,525.42, the Nasdaq composite index increased 15.58, or 0.58 percent, to 2,699.03 and the Russell 2000 index of smaller companies rose 6.12, or 0.76 percent, to 809.12.
Treasury prices turned higher Wednesday after there was surprisingly strong investor demand in a government sale of $18 billion in new 2-year Treasurys. The yield on the benchmark 10-year Treasury note fell to 4.62 percent from 4.64 percent late Tuesday.

Oil Closes Above $80 A Barrel

Oil futures ended higher Wednesday, closing above $80 a barrel as a turbulent day ended with a late rally led by investors who saw an early price dip as a buying opportunity. Light, sweet crude settled at $80.30 a barrel on the New York Mercantile Exchange.

Focusing on developments at companies such as GM, Wall Street shrugged off broader economic news from the Commerce Department, which said demand for durable goods fell in August by the largest amount in seven months. The findings could indicate that recent upheavals on Wall Street and in the housing sector dented the economy.

The report came after data released Tuesday showed that existing home sales stalled in August and consumer confidence fell this month.

Bad News Helps Rate Cut Chances

Although on their face troubling, Wall Street often regards such reports as good news because they can be regarded as fresh reason for the Federal Reserve to lower interest rates again when it meets next month. The central bank last week surprised Wall Street with a larger-than-expected half-point cut in rates - its first in four years - that sent stocks surging.

In addition to corporate and economic news, some of the session's gains could owe to the approaching end of the quarter.

'As you get closer to the end in the next couple of days, you could get some window dressing,' said Marc Pado, U.S. market strategist at Cantor Fitzgerald, referring to some investors' plans to buy and sell stocks to shore up their end-of-the-quarter holdings. He said the Fed's rate cut caught many investors off-guard, so they might move in as buyers.

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