Well, The Banks Like This But You And I Will Pay

Discussion in 'Economics' started by pspr, Jun 25, 2010.

  1. pspr

    pspr

    http://news.yahoo.com/s/ap/20100625/ap_on_bi_st_ma_re/us_wall_street_96

    NEW YORK – After months of angst over the government's plans to regulate the financial industry, investors are able to relax. And they've showed their relief by sending bank stocks soaring.

    Financial companies have outdistanced the rest of the stock market Friday after lawmakers agreed on a banking overhaul bill that is less strict than investors feared.

    Bank of America Corp. rose more than 2 percent, while Goldman Sachs Group Inc. and JPMorgan Chase & Co. each rose more than 3 percent.

    The market's big indexes were narrowly mixed. The Dow Jones industrial average fell almost 9 points, or 0.1 percent, to 10,143. The Standard & Poor's 500 index rose 3, or 0.3 percent, to 1,076. The Nasdaq composite index rose 6, or 0.3 percent, to 2,223.

    Almost four stocks rose for every one that fell on the New York Stock Exchange. Volume came to a heavy 2.56 billion shares.

    THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

    NEW YORK (AP) — The stock market managed a modest gain Friday as investors registered their relief over a banking overhaul bill that is less strict than feared. A stronger euro also lifted stocks.

    The Dow Jones industrials rose 40 points while broader indexes were also slightly higher.

    An assortment of news competed for investors' attention. After the early Friday morning deal on a financial regulation bill, the government reported that the gross domestic product, the broadest measure of the economy, had grown at a weaker pace than originally estimated during the first quarter. And investors were still reacting to BlackBerry maker Research in Motion Ltd.'s disappointing earnings report issued late Thursday. Investors were also waiting to see whether any substantive help for the global economy would come from this weekend meeting of leaders from the G20 countries.

    The GDP and Research in Motion news initially brought stocks lower. But financial stocks rose in response to the financial regulation bill. And a recovery in the euro, the currency shared by 16 European countries, helped other stocks recoup their earlier losses as the day wore on.

    Investors had been concerned that the financial regulation bill would sharply curtail bank profits by limiting financial companies' ability to trade in derivatives. Derivatives are complex securities that companies and investors often use to hedge against losses. But some derivatives are purely speculative investments, and some of this type of derivatives have been blamed for contributing heavily to the collapse of the housing market and the 2008 financial crisis.

    The bill provides for derivative trading to be regulated, but the harshest provisions related to the investments were not included.

    Another investor concern was alleviated: A plan that would have had banks paying for the costs of unwinding mortgage giants Fannie Mae and Freddie Mac, was not included in the bill that will now go to the House and Senate for final approval.

    "The bill could have been a lot worse," said Alan Valdes, vice president at Hilliard Lyons in New York. "It's a bill we can live with."

    That pushed bank stocks higher. U.S. Bancorp rose 3.5 percent, while Bank of America added 3.8 percent. Some of the big Wall Street banks that will see the most changes from the bill also rose in part on relief of knowing what is in the legislation and in part because not all parts of the overhaul were as burdensome as feared. Goldman Sachs Group Inc. rose 3.6 percent, while JPMorgan Chase & Co. gained 3.4 percent.

    But overall gains were limited by the GDP report. The government said the GDP, the broadest measure of the economy's health, rose at a 2.7 percent annual pace in the first quarter, rather than the 3 percent previously estimated. The report follows a string of weaker-than-expected economic numbers in the past week and raised investors concerns about the recovery.

    In early afternoon trading, the Dow Jones industrial average rose 40.13, or 0.4 percent, to 10,192.93. The broader Standard & Poor's 500 index rose 9.34, or 0.9 percent, to 1,083.03, and the Nasdaq composite index rose 18.66, or 0.8 percent, to 2,236.08.

    The market's erratic moves Friday were due in part to the annual reshuffling of stocks in the Russell indexes. That forces investors to buy and sell certain stocks if they have portfolios that follow the indexes.

    The Russell 2000 index of smaller companies rose 11.82, or 1.9 percent, to 644.99.

    Treasury prices rose, driving down interest rates. The 10-year Treasury note's yield fell to 3.12 percent from 3.14 percent late Thursday.

    The euro, which investors have been treating as a measure of confidence in Europe's ability to resolve its economic problems, was up at $1.2390.

    Investors are waiting to see what news comes out of the G20 meeting being held this weekend in Toronto. The world economy, including Europe's debt problems, will dominate the talks. President Barack Obama will be among the leaders attending the meeting.

    Crude oil rose $2.47 to $78.98 on the New York Mercantile Exchange.

    Investors are cautious after the latest economic reports have cast doubt on the strength of the recovery. On Thursday, a disappointing durable goods orders report from the government and downbeat forecasts from analysts raised questions about manufacturing and consumer spending.

    U.S. Bancorp rose 80 cents, or 3.5 percent, to $23.41, while Bank of America climbed 57 cents, or 3.8 percent, to $15.59.

    Goldman Sachs rose $4.87, or 3.6 percent, to $139.85 and JPMorgan advanced $1.31, or 3.4 percent, to $39.34.

    Research in Motion fell $5.57, or 9.5 percent, to $53.01. The company said late Thursday its net income for the most recent quarter rose 20 percent, but investors were displeased with company's revenue and subscriber growth.

    Almost four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 705.6 million shares.

    The FTSE-100 index in London fell 1 percent, while Paris' CAC-40 index fell 1 percent and Frankfurt's DAX index lost 0.7 percent. Earlier, the Nikkei 225 index in Tokyo closed down nearly 2 percent.