Blue Spot

Stocks Leap as Feds Fashion Aid Plan - WSJ.com

U.S. stocks jumped at the open and the Dow Jones Industrial Average was up over 300 points as the U.S. government worked on plans to wade into markets in the most decisive fashion since the 1930s.

The Dow recently rose 291.88 points, or 2.7%, to 11311.67.

While hurting hedge funds and other momentum traders, the government's intervention through relieving banks of toxic mortgage bonds, backstopping money-market accounts and temporarily banning short sales of financial stocks may finally stem the panic on Wall Street and turn the stock market and the banking system around. One veteran trader compared the action to John Pierpont Morgan spearheading the move by bankers to bail out of Wall Street in 1907. The government appeared determined to prevent the ripple effects of financial markets from dragging the "real economy" into a depression, the trader said.

"I would be amazed if we haven't seen the bottom here," the trader said. "It's very good for the markets (but) it's very bad for the people who've taken the point of view that things in the U.S. and globally are fundamentally so bad that they have to be unsound at much lower price levels. The authorities are saying, 'not so fast.'"

Initial reports of the government action stirred the rally in the Dow Thursday. The Nasdaq Composite Index recently rose 51.27 points, or 2.3%, to 2250.37. The Standard & Poor's 500 Index rose 34.63 points, or 2.9%, to 1241.14.

Labels: Economy, Financial