- The Washington Times - Thursday, September 18, 2008

NEW YORK (AP) — Financial markets appeared less strained Thursday, but investors were still nervous, seeking safe investments like gold and Treasury bills and showing some reluctance to return to stocks.

The modest moves in stocks were a welcome sign, though the advances the Dow Jones industrial average showed at times did little to offset the 800-point decline the blue chips had logged over the first three sessions this week.

Investors appeared somewhat relieved after the Federal Reserve and other major central banks around the world on Thursday acted in concert to inject as much as $180 billion into global money markets, an attempt to keep the credit crisis from worsening. The Fed added another $55 billion in overnight loans Thursday.

Market participants still appear to be treading carefully to determine how to proceed in what is looking to be the most troubling period for the world’s financial system in most investors’ memory.

Grinding gears in the world’s credit markets have driven up the cost of borrowing for businesses, while investors are also contending with fears that more big-name financial companies could falter. The fear in the markets had led to speculation about the future of such major players as thrift bank Washington Mutual Inc. and investment bank Morgan Stanley. Media reports have been saying that Wells Fargo & Co. and Citigroup Inc. are interested in a possible takeover of Washington Mutual; and a person familiar with the negotiations said Morgan Stanley and Wachovia Corp. are in talks about a possible combination. He spoke on condition of anonmyity because the talks are ongoing.

“We are in uncharted territory,” said Linda Duessel, the equity market strategist at Federated Investors. “The seriousness and the size of this fallout has been underestimated from the beginning. It’s most disconcerting what’s going on in the credit market.”

In late morning trading, the Dow Jones industrial average rose 21.01, or 0.20 percent, to 10,630.67.

Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 1.03, or 0.09 percent, to 1,155.36, and the Nasdaq composite index slipped 5.01, or 0.24 percent, to 2,093.84.

Monday’s 504-point loss in the Dow was its biggest drop since the drop following the September 2001 terror attacks. The blue-chip index is now about 24 percent below its Oct. 9, 2007, record close of 14,164.53.

On Wednesday, the 3-month Treasury bill considered one of the safest short-duration assets saw demand surge so high that its yield briefly dipped into negative territory for the first time since 1940. Investors are so focused on parking their money in safe assets that they’re willing to take very little return on such investments.

The prices for short-duration Treasurys fell from Wednesday’s levels. But the yield on the 3-month T-bill was still extremely low at 0.19 percent up from 0.2 percent late Wednesday, but well below its yield of 1.60 percent just a week ago.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.44 percent in early Thursday trading from 3.42 percent late Wednesday.

Gold, another safe haven, rose further on Thursday, after posting their largest one-day price jump ever on Wednesday.

Oil is not considered as safe as gold but it, too, has been drawing investors who deem it safer than stocks. Light, sweet crude on the New York Mercantile Exchange rose 55 cents to $97.71 a barrel, after jumping more than $6 a barrel Wednesday.

The dollar fell against most other major currencies.

In economic data, the Labor Department reported that initial claims for unemployment benefits rose by 10,000 last week to 455,000, due primarily to Louisiana’s job losses from Hurricane Gustav.

The Philadelphia Fed said its regional manufacturing report improved to a 3.8 in September from a negative 12.7 in August. It marks the first positive reading since November.

In earnings news, FedEx Inc. posted a 22 percent decline in quarterly earnings, as the package delivery company cut costs to offset slowing global growth. The fiscal first-quarter results came in as expected. The stock fell $1.19 to $86.88.

Overseas, Japan’s Nikkei stock average dropped 2.22 percent to its lowest closing level in over three years. Hong Kong’s Hang Seng index lost 0.03 percent.

In afternoon trading, Britain’s FTSE 100 rose 0.81 percent, Germany’s DAX index rose 1.13 percent, and France’s CAC-40 fell 0.64 percent.

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