- The Washington Times - Wednesday, May 4, 2005

NEW YORK (AP) — Stocks gained ground yesterday as investors were emboldened by decent earnings, a handful of mergers and billionaire investor Kirk Kerkorian’s bid to substantially add to his stake in General Motors Corp. The Dow Jones Industrial Average rose almost 125 points.

Wall Street saw a broad rally as investors shrugged off some of the worries that have dogged stocks in recent weeks. The potential return of the 30-year bond was the biggest news of the day. But analysts said what really lured stock buyers back from the sidelines was Mr. Kerkorian’s commitment to troubled automaker GM, an unexpected move that may restore some faith in the market.

“It kind of surprised everyone that someone as savvy as him would talk about increasing his stake in a beleaguered company. It suggested that there is value in this market,” said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. “On the days the stock market reverses or changes direction, it’s often hard, historically, to find a reason why, on that day. I used to say the market seems to reach magical moments, and this may very well be one of those magical moments, where the configuration of events is just enough to get investors back on the bandwagon.”

The Dow closed up 127.69, or 1.2 percent, at 10,384.64, largely resulting from the 18 percent rise in GM’s share price.

Broader stock indicators were also higher. The Standard & Poor’s 500 Index gained 14.48, or 1.25 percent, to 1,175.65. The Nasdaq Composite Index rose 29.16, or 1.5 percent, to 1,962.23.

The announcement that the government is considering bringing back the 30-year Treasury rattled the bond market, sending the yield on the 10-year note to 4.19 percent, up from 4.17 percent late Tuesday. Prices of the existing 30-year Treasury also sank. The 30-year note, discontinued in 2001 at a time of government surplus, could provide important financing in an era of record budget deficits; a decision is expected in August.

The U.S. dollar fell yesterday against other major currencies in European trading; gold prices rose. Oil futures rebounded from earlier lows, rising 63 cents to settle at $50.13 per barrel on the New York Mercantile Exchange after a weekly government report showed rising supplies of crude oil and gasoline.

“Oil is going to influence us every day, there’s no doubt. Any time we see some drop in oil prices, that’s good for the market,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “I think there’s quite a bit of cash on the sidelines taking its cue from the positive news on GM, and from decent earnings projections.”

GM soared $5.03 to $32.80 after Mr. Kerkorian’s Tracinda Corp. offered to pay about $870 million for a nearly 5 percent stake in the automaker, boosting its stake to nearly 9 percent. Mr. Kerkorian is seeking 28 million shares at $31 apiece.

Time Warner Inc. added 60 cents to $17.28 after the world’s largest media company said its first-quarter earnings rose slightly on growth at its cable networks, cable TV and several one-time gains. Per share earnings beat the consensus estimate of analysts surveyed by Thomson Financial by a penny a share.

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