Stock markets shot up as much as 4 percent this morning after the Treasury Department unveiled a new plan to help banks cleanse their balance sheets of toxic assets.
Shortly before noon, the blue-chip Dow Jones industrial average was up 3.7 percent, or 268 points, to 7,546.1, while the broader Standard & Poor's 500-stock index rose 3.7 percent, or 29 points, to 797.3. Both indexes had jumped 4 percent during mid-morning. The tech-heavy Nasdaq jumped 3.4 percent, or 49 points, to 1,506.5.
The gains amount to a vote of confidence by investors in the program to purchase toxic assets, known as the Public Private Investment Plan. It calls for the government to partner with private investors to buy between $500 billion and $1 trillion in troubled real-estate related loans and securities that have poisoned financial institutions and destroyed investor confidence. Those assets will then be auctioned to the highest bidder, removing them from banks' balance sheets.
"The market's really trading more on psychology now than fundamentals," said Matthew Eads, portfolio manager and securities analyst for "Investors are really looking for anything to grab on that's a sign of good news."
The financial sector led stocks' morning charge with a 5.6 percent gain. Citigroup was up 19.1 percent and Bank of America shot up 15.5 percent amid heavy trading. Wells Fargo was up 10.5 percent, and J.P. Morgan rose 12.6 percent.
Energy stocks also rose sharply, gaining more than 5 percent, on news of a $15.6 billion merger between Canadian giants Suncor Energy and Petro-Canada that will create the country's largest energy firm. Shares of Petro-Canada on the New York Stock Exchange jumped 27 percent.
Investors also got an unexpected boost from news this morning that existing home rose sales 5.1 percent to a seasonally adjusted rate of 4.72 million in February compared to the previous month. Many analysts had expected the rate would fall. Still, home sales are still down about 5 percent from a year ago.
Across the world, stock markets also rallied on the Treasury Department's announcement . Japan's Nikkei 225 rose 3.4 percent, or 270 points, to 8216, while Hong Kong's Hang Seng Index jumped 4.8 percent, or 614 points, to 13,447. In London, the FTSE 100 was up 2.2 percent this morning, or 85 points, to 3927.
U.S. stock markets have fluctuated wildly this month, hitting 12-year-lows before rallying over the past two weeks -- the first time since May that stock markets have had two consecutive positive weeks.
By Ylan Q. Mui
Washington Post Staff Writer
Monday, March 23, 2009; 11:48 AM
