Wall Street climbs on Bush mortgage plan optimism
Stocks surged on Friday after speeches by President Bush and Federal Reserve Chairman Ben Bernanke reassured investors that top officials are monitoring market turmoil and are ready to act as needed.
Major indexes rose more than 1 percent in thin trading before a long holiday weekend, led by shares of financial services and energy companies. Citigroup, the largest U.S. bank, climbed 1.2 percent to $46.80, while energy companies were buoyed by a rise in crude oil prices to four-week highs.
Fannie Mae and Freddie Mac — the two large U.S. housing finance firms — were among the biggest gainers as investors speculated they may benefit from a Bush plan to help homeowners struggling to meet mortgage payments.
“Bush going out of his way to speak about the stock market may be seen as a sign that attention is being paid at the highest levels,” said Peter Jankovskis, chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
“People are thinking that this is a central focus and that someone is minding the store.”
The Dow Jones industrial average was up 162.74 points, or 1.23 percent, at 13,401.47. The Standard & Poor’s 500 Index was up 18.89 points, or 1.30 percent, at 1,476.53. The Nasdaq Composite Index was up 29.37 points, or 1.14 percent, at 2,594.67.
Bush’s proposal to deal with the mortgage crisis, sparked by rising defaults on risky subprime loans, reassured markets that have been battered by credit turmoil. Some analysts have warned the problems could lead to a recession.
Bernanke told a symposium in Jackson Hole, Wyoming, that the U.S. central bank will take the necessary steps to shelter the economy from turmoil in markets — though he added the Fed will not bail out investors who made bad decisions.
Bush urged lenders to work with homeowners to renegotiate loan terms and called on Congress to approve legislation to modernize the Federal Housing Administration, which provides mortgage insurance to borrowers through private sector lenders.