- The Washington Times - Monday, July 14, 2008

NEW YORK (AP) — U.S. stocks headed for a sharply higher open Monday after the Federal Reserve and the Treasury Department outlined steps aimed at shoring up confidence in mortgage financiers Fannie Mae and Freddie Mac.

Shares of the government-chartered companies have tumbled over the past week as investors have fretted over whether they could survive losses in their mortgage portfolios.

The Fed said in the plan announced Sunday it would lend to the two companies “should such lending prove necessary.” Secretary Henry Paulson said the Treasury is asking Congress for quick approval of a plan to expand its line of credit to the two companies and to make an equity investment in the companies, if necessary.

See related story:“Government will lend to Fannie, Freddie.”

Wall Street is on edge about the well-being of the companies because Fannie Mae and Freddie Mac hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States. Worries over their future led to a volatile session Friday in which the Dow Jones industrial average dipped below the 11,000 mark for the first time in about two years before paring its losses.

While the companies say they have adequate access to capital, the government’s effort to lend aid to the companies is designed to reassure investors who have grown nervous about further fallout from the nearly year-old credit crisis. A weak housing market has eroded the value of many securities backed by now faltering mortgages.

In the early going investors appeared pleased with the government’s actions. Dow futures rose 115, or 1.04 percent, to 11,211. Standard & Poor’s 500 index futures rose 16.70, or 1.35 percent, to 1,256.40, while Nasdaq 100 index futures advanced 24.75, or 1.36 percent, to 1,845.25.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its yield, rose to 4.01 percent from 3.96 percent late Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 93 cents to $143.56 in premarket electronic trading on the New York Mercantile Exchange.

In corporate news, Fannie Mae shares rose $2.75, or 27 percent, to $13 in premarket electronic trading, while Freddie Mac jumped $1.85, or 24 percent, to $9.60 after announcement of the government’s plans.

Anheuser-Busch Cos. agreed to a sweetened $52 billion takeover bid from Belgian brewer InBev SA. The deal involving a marquee name in American business combines the maker of Budweiser and Bud Light with the producer of Stella Artois and Beck’s.

Sen. Charles Schumer on Sunday defended himself against claims by regulators that he was in part to blame for a run on IndyMac Bancorp Inc. that led to the bank’s takeover by the government Friday. IndyMac is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said after taking control of the bank.

Yahoo Inc. revealed Saturday that it had rejected Microsoft Corp.’s latest attempt to acquire its online search engine in a joint proposal made with activist investor Carl Icahn, who is leading an effort to remove Yahoo’s current board.

The renewed concerns about the financial sector come in what is expected to be a busy week for corporate news, with a flurry of quarterly results due from names like Intel Corp., Cola-Cola Corp., Microsoft Corp. and Citigroup Inc.

Overseas, Japan’s Nikkei stock average rose 0.45 percent. In afternoon trading, Britain’s FTSE 100 rose 1.77 percent, Germany’s DAX index rose 1.26 percent, and France’s CAC-40 advanced 1.66 percent.

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