Wall Street Gains as Investors Bet on Banks: Thursday Dow at 7,304, Up 33

NEW YORK (AP) — Wall Street set aside some of its worries about the financial system Thursday as governments stepped up efforts to help struggling banks.

Stocks rose moderately, extending a back-and-forth pattern shown throughout the week. The gyrations are revealing investors’ indecision rather than big shifts in sentiment over the economy — they are still looking down a long list of concerns about the recession and the stability of banks.

“I don’t think anybody is comfortable if you’re in the market right now. You still have quite a bit of fear driving equity prices,” said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management.

Investors bought into some beaten-down bank stocks as the U.S. and British governments signaled they would do more to help the industry and as several big financial houses announced steps to further slash costs and streamline their operations.

President Barack Obama’s proposed $3.55 trillion budget outlines spending up to $750 billion more for additional financial industry rescue efforts on top of the $700 billion that Congress has already authorized.

The British government set up a program to allow banks to access government insurance against future losses on bad assets. The plan is designed to boost lending by reducing banks’ uncertainty about the value of past investments.

Investors also are applauding planned job cuts at JPMorgan Chase & Co. And moves by Royal Bank of Scotland to sell businesses and a decision by Swiss banking giant UBS AG to replace its chief executive helped lift financial shares.

The improved sentiment about banks overshadowed a larger-than-expected fourth-quarter loss at General Motors Corp. as well as weak readings on employment, demand at factories and home sales.

“At the moment, economic data are not that crucial, at least from the market reactions,” Knapp said. He said some investors are starting to regard the numbers as not likely to get much worse, even if they don’t improve for some time.

In midday trading, the Dow Jones industrial average rose 60.77, or 0.84 percent, to 7,331.66.

Broader stock indicators also rose. The Standard & Poor’s 500 index rose 6.52, or 0.9 percent, to 771.42, and the Nasdaq composite index gained 4.09, or 0.3 percent, to 1,429.52.

The Russell 2000 index of smaller companies rose 2.49, or 0.6 percent, to 403.93.

Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, where volume came to 525 million shares.

Stocks ended a bumpy session down 1 percent Wednesday. The government addressed some questions about banks by confirming it will buy preferred shares from banks that can be converted into common shares, and reiterated that it does not plan to nationalize banks.

In afternoon trading overseas Thursday, Britain’s FTSE 100 rose 1.33 percent, Germany’s DAX index rose 2.32 percent, and France’s CAC-40 rose 1.78 percent. Earlier, Japan’s Nikkei stock average slipped 0.04 percent.

Royal Bank of Scotland posted an annual loss of $34.4 billion, the biggest in British corporate history, and announced a massive restructuring in which the company will jettison many of its international businesses. The company said it will put toxic assets into the UK government insurance program. The stock jumped $1.74, or 26 percent, to $8.33 in New York trading.

Also in Europe, UBS replaced its CEO on Thursday, naming Oswald J. Gruebel to take over immediately. He is the former head of crosstown rival Credit Suisse Group and led a turnaround of that company before he left two years ago. Gruebel replaces Marcel Rohner, who has resigned. UBS rose $1.30, or 15 percent, to $10.06.

In the U.S., investors are watching for news from Citigroup Inc. The company’s effort to boost its equity capital could result in the federal government raising its stake in the bank this week to as much as 40 percent, a person familiar with the talks said.

The company received $45 billion in U.S. bailout money made up primarily of debt-like preferred shares, plus federal guarantees to cover losses on some $300 billion in risky investments. The bank has been in talks with regulators over ways the government could help strengthen the bank still further.

While a deal is unlikely to be announced Thursday, it could be come within days, the person told The Associated Press late Wednesday, asking not to be named because the discussions are still continuing. Citigroup rose 5 cents, or 2 percent, to $2.57.

JPMorgan jumped $2.05, or 9.4 percent, to $23.78 as the company met with analysts and said it would cut about 12,000 jobs as it folds in the operations of Washington Mutual Inc. JPMorgan acquired the assets of WaMu, the largest bank ever to fail in U.S. history, at the end of September.

General Motors Corp. reported a $9.6 billion loss for the fourth quarter and said it burned through $6.2 billion of cash in the last three months of 2008. Top GM executives were in Washington, D.C., Thursday to meet with the Obama administration’s auto task force to talk about restructuring and additional loans. GM slipped 3 cents to $2.52.

Investors looked past weak economic readings.

The Labor Department said the number of newly laid-off Americans seeking unemployment benefits rose to 667,000 from the previous week’s figure of 631,000. Analysts had been expecting a modest drop in claims. The new claims are the most since October 1982, though the labor force has grown by about half since then.

The Commerce Department said orders for durable goods — manufactured products expected to last at least three years — fell 5.2 percent in January, which was more than expected.

The department also said sales of new homes tumbled 10.2 percent in January to a record-low annual pace of 309,000. The reading was weaker than the pace of 330,000 that economists expected and broke a monthly low record set in September 1981.

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