- The Washington Times - Thursday, March 12, 2009

NEW YORK (AP) - Wall Street extended its rally into a third day as investors took in stride a cut in General Electric Co.’s credit rating.

Standard & Poor’s lowered GE’s top rating one notch because of problems at the conglomerate’s lending arm, but indicated it was not eying another downgrade. Many investors had expected deeper cuts for GE, the oldest member of the Dow Jones industrials.

GE stock jumped more than 10 percent, helping drive the Dow back above the 7,000 mark.

“It’s oddly encouraging” that GE maintained a stable rating after its downgrade, said Kim Caughey, equity research analyst at Fort Pitt Capital Group. The reason, she said, is that S&P; and other ratings services have been trying to act more aggressively, having been criticized over the past year for failing to identify risks in subprime mortgage investments.

Another big gainer in the Dow was General Motors Corp., the troubled automaker that has been borrowing money from the government to stay in business. GM’s chief financial officer said the company will not need the $2 billion loan for March it previously requested from the U.S. government.

In midday trading, the Dow Jones industrials rose 96.37, or 1.39 percent, to 7,026.77.

Broader stock indicators also turned higher. The Standard & Poor’s 500 index rose 11.26, or 1.56 percent, to 732.62, and the Nasdaq composite index rose 18.85, or 1.37 percent, to 1,390.49.

The Russell 2000 index of smaller companies rose 9.27, or 2.53 percent, to 375.57.

Advancing stocks outnumbered decliners by about 3 to 1 on the New York Stock Exchange.

The market rose modestly Wednesday after soaring Tuesday in response to news that Citigroup Inc. was profitable in January and February. It was the market’s first two-day advance in more than a month.

Bank stocks continued to climb Thursday _ Citigroup edged up 4 percent, Wells Fargo & Co. rose 2 percent, Bank of America Corp. rose 8 percent, and JPMorgan Chase & Co. rose 7 percent.

Certainly, worries about the financial industry are far from alleviated.

Investors are still waiting on details about a plan for the “toxic” loan-backed assets sitting on banks’ books from Treasury Secretary Timothy Geithner. Geither spoke at a Senate hearing Thursday, but the topic was the federal budget. He said current jumps in spending are short-term and will have to be significantly lowered.

Banks and other companies also face an economy that appears to still be deteriorating.

The Labor Department said first-time claims for unemployment benefits rose to 654,000 from the previous week’s figure of 639,000, more than analysts’ expectations.

The Commerce Department said retail sales fell by 0.1 percent in February _ less than the 0.5 percent drop economists predicted, but the seventh decline in eight months. It also reported that business reduced inventories for a fifth straight month in January.

And investors are cognizant that much of this week’s stock rebound can be attributed to technical factors.

The selloff that hurled the stock market to 12-year lows last week was driven largely by short-selling, when a trader bets on a stock falling by selling borrowed shares. Traders have now been covering those short bets by buying stocks, after the Securities and Exchange Commission said it was considering reinstating the “Uptick Rule.” The rule, eliminated in 2007, aimed at curbing short-selling by only allowing it when a stock edged higher.

Short-sellers “are having to think long and hard about how they’re going to do business going foward,” Caughey said. Lately, driving stocks lower through short-selling has “been like shooting fish in a barrel,” she said.

The pharmaceutical industry was driven higher Thursday by more acquisition news.

Switzerland’s Roche Holding AG agreed to buy Genentech Inc. for $46.8 billion, acquiring the 44 percent stake in the biotech firm that it doesn’t already own, while Gilead Sciences Inc. agreed to buy CV Therapeutics Inc. for $1.4 billion. Earlier this week, drugmakers Merck and Schering-Plough agreed to merge in a $41 billion deal.

Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 2.91 percent. The yield on the three-month T-bill, considered one of the safest investments, was unchanged from late Wednesday at 0.22 percent.

The dollar rose against other major currencies. Gold prices also rose.

Light, sweet crude for April delivery rose $1.33 to $43.66 a barrel on the New York Mercantile Exchange.

Overseas markets were mixed. Japan’s Nikkei stock average dropped 2.41 percent, while Hong Kong’s Hang Seng index rose 0.59 percent. Britain’s FTSE 100 slipped 0.01 percent, Germany’s DAX index fell 0.08 percent, and France’s CAC-40 fell 0.21 percent.


On the Net:

New York Stock Exchange: https://www.nyse.com

Nasdaq Stock Market: https://www.nasdaq.com

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