- The Washington Times - Friday, March 21, 2008

NEW YORK (AP) — Wall Street capped a week of remarkable volatility with a big advance yesterday that left stocks higher for the week but didn’t silence all of investors’ concerns about the economy and the financial system.

Bargain-hunting and a milder-than-expected drop in a regional manufacturing report helped leaven stocks yesterday. The Dow Jones Industrial Average rose about 260 points, giving the blue chips a gain of more than 3 percent for the week. Broader indexes finished the week with gains of 2 percent to 3 percent. The markets are closed today, Good Friday.

A week that opened with fearful questions over the soundness of the financial system following the near collapse of Bear Stearns Cos. ended on a more upbeat note, thanks in part to the Federal Reserve’s efforts to inject both liquidity and calm into the markets.

The central bank not only again deployed its primary tool for stimulating economic activity — an interest rate cut — but also took several steps aimed at oiling the troubled credit markets, making it easier for banks to breathe. Policy-makers said they would loan directly to investment banks and accept as collateral much of the now-shunned debt that is backed by mortgages. A spike in defaults on home loans has made many financial players hesitant to extend credit.

But while many investors praised the Fed’s unusual steps — including the deal it brokered for JPMorgan Chase & Co. to buy a liquidity-starved Bear Stearns for a fraction of its value only a week ago — many on Wall Street still cling to misgivings about the banking system and the economy.

But Wall Street found reason to buy back into stocks when the Philadelphia Fed said manufacturing activity is dropping in March by less than it did last month and by less than many economists anticipated.

And another day of sharp declines in commodities prices gave investors some hope that lower energy and food prices might boost consumers’ discretionary spending and ease inflation concerns. Crude oil fell, while gold prices declined sharply.

Still, the markets are apt to stay volatile for some time, as investors digest news on the economy and the troubled financial sector.

“It’s the every-other-day theory — up one day, and down the next,” said Scott Brown, chief economist at Raymond James & Associates.

The Dow yesterday rose 261.66, or 2.16 percent, to 12,361.32.

Broader stock indicators also advanced. The Standard & Poor’s 500 Index rose 31.09, or 2.39 percent, to 1,329.51, and the Nasdaq composite Index rose 48.15, or 2.18 percent, to 2,258.11.

Though the week was a shortened one for Wall Street, the volatility packed into four days made it feel much longer. Yesterday’s gains came a day after a steep drop that eroded most of a 420-point gain in the Dow on Tuesday — the biggest in more than five years — following the Fed’s decision to lower its benchmark interest rate by 0.75 percentage point to 2.25 percent.

Bond prices rose yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.34 percent from 3.41 percent late Wednesday.

Light, sweet crude fell 70 cents to settle at $101.84 on the New York Mercantile Exchange. Gold fell $33, or 3.5 percent, to $912.3 an ounce, while the dollar was mixed against other major currencies.

Shares in energy and metals companies were mixed yesterday. ConocoPhillips rose $1.22 to $74.83; Barrick Gold Corp. fell $3.25, or 7.2 percent, to $42; and Newmont Mining Corp. fell $2.75, or 5.6 percent, to $45.97.

Investors faced fresh concerns about tightness in the credit markets. CIT Group Inc. fell $2.01, or 17 percent, to $9.63 after the financial-services company said it is tapping into its $7.3 billion in credit lines to repay debt and finance its commercial lending business. The company says it cannot obtain financing from other sources.

Among financials, Morgan Stanley rose $6.22, or 14 percent, to $49.67, while Citigroup Inc. rose $2.09, or 10 percent, to $22.50.

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