NEW YORK (AP) - Stocks pointed to a sharply higher open Monday as details emerged from the government’s plan to help banks remove as much as $1 trillion in bad assets from their books.
The Treasury Department on Monday announced a plan to revive lending that would rely on the government’s $700 billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors.
The goal is to buy toxic assets that are weighing on banks’ balance sheets. The bad loans are crimping banks’ ability to resume more normal lending to consumers and businesses. The drop in lending is hurting economic activity and making the current recession more prolonged and severe.
The plan seeks to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.
Traders are betting they will get more detail than from Treasury Secretary Timothy Geithner’s first effort to overhaul the banking rescue program on Feb. 10. Investors, upset with a lack of specifics, sent the Dow Jones industrial average tumbling 380 points that day.
Investors also have been more upbeat in the past two weeks after troubled banks told investors they had made money in the first two months of the year and after reports on retail sales and home building came in better than expected. The Dow is coming off its first back-to-back weekly gains in close to a year.
Dow industrials futures jumped 193, or 2.7 percent, to 7,408. Standard & Poor’s 500 index futures rose 24.50, or 3.2 percent, to 788.60, while Nasdaq 100 index futures rose 32.00, or 2.7 percent, to 1,220.00.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.65 percent from 2.64 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.22 percent from 0.19 percent Friday.
Light, sweet crude rose 55 cents to $52.61 a barrel in electronic trading on the New York Mercantile Exchange.
The dollar was mixed against other major currencies, while gold prices fell.
Investors also will be looking to a report from a real estate trade group that is expected to show sales of existing homes fell slightly last month.
The National Association of Realtors’ report on sales of existing U.S. homes is likely fell to a seasonally adjusted annual rate of 4.45 million units, from 4.49 million a month earlier, according to economists surveyed by Thomson Reuters. The report is due at 10 a.m. EST.
In corporate news, Daimler AG opened nearly 7 percent higher on Monday following the announcement that Abu Dhabi-based Aabar Investments PJSC would buy a stake in the automaker best known for its Mercedes-Benz brand.
Jewelry retailer Tiffany & Co. said its fourth-quarter profit plunged more than 75 percent after a steep drop in sales over the key holiday season.
Overseas, Japan’s Nikkei stock average rose 3.4 percent. In afternoon trading, Britain’s FTSE 100 rose 1.6 percent, Germany’s DAX index rose 2 percent, and France’s CAC-40 rose 1.2 percent.
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