- The Washington Times - Friday, September 19, 2008

NEW YORK (AFP) - U.S. stocks roared higher Friday as confidence was lifted by news of the U.S. government’s full-frontal assault on the financial crisis including a massive plan to help save troubled firms drowning in soured assets.

Amid a powerful global equity rally, the Dow Jones Industrial Average jumped 381.94 points (3.47 percent) to 11,401.63 at 1505 GMT following a 400-point rally for blue chips Thursday as news of the program filtered out.

The Nasdaq composite pared early gains but rose 59.67 points (2.71 percent) to 2,258.77 and the Standard & Poor’s 500 index climbed 42.24 points (3.50 percent) to 1,248.75.

“Wall Street appears to have turned the corner,” said Fred Dickson at DA Davidson & Co, reacting to what he called “a package designed to attack the problems at the heart of the financial crisis and reduce the general level of fear that has move moved onto Main Street.”

Market action came as U.S. authorities bolstered their arsenal to battle the financial market storm, readying a massive rescue plan worth hundreds of billions of dollars along with other emergency steps.

Treasury Secretary Henry Paulson said a rescue plan being drafted with Congressional leaders to help purge bad assets from the banking sector will cost “hundreds of billions” of dollars.

As officials scrambled to draft legislation, U.S. authorities offering fresh guarantees to stem a run on money market deposits and issued new emergency rules to curb short sales, seen as a factor in driving financial firms into ruin.

“Overnight, the game changed,” said John Wilson at Morgan Keegan. “We hope this is the beginning of something major.”

John Ryding at RDQ Economics said that “the Treasury and the Fed have finally realized the depth and systemic nature of the crisis. We believe that these actions will constitute the wider firebreak that will contain the crisis.”

Chris Lafakis at Economy.com said the latest flurry of action “has significantly eased the concerns of skittish investors, who have been seeking shelter in the bond market in droves.”

He added: “The improved outlook for the US financial system is inspiring confidence that the US economy will not undergo a severe recession and that the Federal Reserve will not be forced to once again slash interest rates.”

Unsurprisingly, financial shares were leading the surge.

Morgan Stanley, which had complained about short sellers driving its shares lower, leapt 24 percent to 27.97 dollars. Some reports said talks by the Wall Street investment bank on a merger were making progress.

Rival investment firm Goldman Sachs vaulted 18 percent to 127.88 dollars.

Troubled savings and loan Washington Mutual jumped 29 percent to 3.85 dollars amid reports it was in talks on a tie-up with Citigroup, up 20 percent at 20.07.

Among other key shares, Oracle lifted 9.5 percent to 20.53 dollars after a better-than-expected quarterly earnings report from the business software giant.

Texas Instruments advanced 5.5 percent to 24.00 dollars after the semiconductor maker announced a boost in its dividend.

Bonds fell as investors regained their risk appetite. The yield on the 10-year U.S. Treasury bond increased to 3.733 percent from 3.437 percent Thursday and that on the 30-year bond rose to 4.344 percent against 4.113 percent. Bond yields and prices move in opposite directions.

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