Stocks rebound on agreement on stimulus bill
By Tim Paradis
NEW YORK — Investors are placing bets on an improvement in the economy after key lawmakers announced an agreement Wednesday afternoon on a $789 billion economic stimulus plan.
Stocks turned higher on the announcement after drifting lower in early afternoon trading. The moves come a day after a steep selloff on disappointment over the government’s plans for reshaping its financial rescue fund.
But word of the agreement on the stimulus measure cheered investors. It was not immediately clear when final votes in the two houses would occur.
The measure includes provisions for unemployment benefits, food stamps, health coverage and more. It also includes billions for states facing yawning budget gaps.
Investors are eager for any signals that the economy could begin to recover. Proponents hope the bill’s mix of spending and tax cuts will promote consumer spending, which accounts for more than two-thirds of U.S. economic activity. Spending has stalled since the mid-September bankruptcy of Lehman Brothers Holdings Inc. froze credit markets and deepened the recession.
Washington was once again the driving factor behind the market’s moves on Wednesday. A day earlier investors showed frustration with what they saw as a lack of details from Treasury Secretary Timothy Geithner on how the government plans to direct more than $1 trillion in public and private aid to support the ailing financial system. Major stock market indexes tumbled more than 4 percent.
And chief executives of the nation’s top banks appeared before a House committee Wednesday to answer questions about how they have put to use more than $160 billion in taxpayer money to date.
Anthony Conroy, managing director and head trader for BNY ConvergEx Group, said investors are simply trying to keep ahead of the rush of news about the banking system and the economy.
"I think everybody is trying to get through all this news. Without healthy financials it’s very hard to have a healthy economy," he said. "Everybody has to digest all the tidbits of information that are coming out."
In late afternoon trading, the Dow Jones industrial average rose 33.93, or 0.43 percent, to 7,922.81.
Broader stock indicators also turned higher. The Standard & Poor’s 500 index rose 3.78, or 0.46 percent, to 830.94, and the Nasdaq composite index rose 1.90, or 0.12 percent, to 1,526.63.
The Russell 2000 index of smaller companies rose 0.62, or 0.14 percent, to 446.39.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to a light 1.03 billion shares.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.75 percent from 2.82 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.31 percent from 0.30 percent late Tuesday.
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