Stocks Rise After Buffett Offer of Aid to Bond Insurers Eases Some Credit Concerns

Wall Street finished mostly higher Tuesday after billionaire investor Warren Buffett offered to help out troubled bond insurers, easing some of the market's concerns about further deterioration in the credit markets. The Dow Jones industrials rose more than 130 points.

In an interview on CNBC, Buffett said his Berkshire Hathaway Inc. holding company has offered a second level of insurance on up to $800 billion in municipal bonds. The reinsurance offer is for bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co., known as FGIC.

Word of the offer gave some investors relief although Buffett said a deal would only back municipal bonds, and not the risky and complicated financial instruments that many see as more likely to have problems. Still, further assurances on the soundness of municipal bonds could help shore up Wall Street's confidence and reinforce the differences in quality among various levels of debt.

Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said Buffett's move gives the market a bit of needed confidence.

"It's a good thing to see," he said. He also agreed with Buffett's assessment that stocks are mostly fairly valued. "We could definitely test some more lows going forward but there was a pretty good drop-off there again and I think people are trying to take advantage of it to get some quality stocks at cheaper prices."

The Dow rose 133.40, or 1.09 percent, to 12,373.41. The blue chip index was up more than 200 points earlier in the session. The Standard & Poor's 500 index advanced 9.73, or 0.73 percent, to 1,348.86.

However, the Nasdaq composite index edged down 0.02, or less than 0.01 percent, to 2,320.04.

Tech stocks fell in the last hour of trading amid uncertainty about Microsoft Corp.'s bid to acquire Yahoo Inc. -- an overture that could eventually go hostile. In addition, Research In Motion Ltd. fell after its Blackberry e-mail system had an outage.

Bond prices fell Tuesday after Buffett's announcement. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.67 percent from 3.63 percent late Monday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 81 cents to settle at $92.78 a barrel on the New York Mercantile Exchange.

Buffett's overture to the big bond insurers reassured investors. Buffett said one firm rejected his offer and he is still waiting to hear from the other two.

Bond insurers write policies that promise to cover payments to bondholders if the entity that issued the bonds defaults. Reinsurance provides a second level of insurance on those bonds.

My Opinion

Investors should be careful not to read too much into the market's advance recent readings on U.S. retail spending show that Americans are hurting financially.

"Stock markets will have good days in bear markets,"

Investors also appeared pleased Tuesday by a government plan called Project Lifeline involving the six largest mortgage lenders to help at-risk borrowers with all types of mortgages retain their homes.

And adding to investors' upbeat mood, Credit Suisse Group sharply reduced its estimate of how much exposure it has to subprime mortgage debt. Switzerland's second largest bank said its debt tied to subprime mortgages, those given to borrowers with poor credit, fell to 1.6 billion francs ($1.45 billion) from 3.9 billion francs at the end of September. Its fourth-quarter net profit fell 72 percent because of write-downs. The company's U.S.-traded shares rose $1.11 to $51.94.

General Motors Corp. fell 52 cents to $26.60 after announcing a fresh round of buyouts to all 74,000 of its U.S. hourly workers represented by the United Auto Workers. The company also reported losses of $38.7 billion in 2007, the largest annual loss for an automotive company.

Yahoo fell 30 cents to $29.57 after the search engine's board rejected Microsoft's $44.6 billion bid. That raised speculation that Microsoft -- whose shares rose 13 cents to $28.34 -- might take its offer directly to shareholders.

Meanwhile, Research In Motion shares fell $2.97, or 3.1 percent, to $91.50 after the company acknowledged that its network service was widely disrupted Monday.

Advancing issues outnumbered decliners by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.92 billion shares from 3.51 billion.

The Russell 2000 index of smaller companies rose 5.73, or 0.82 percent, to 705.48.

Overseas, Japan's Nikkei stock average inched up 0.04 percent and Hong Kong's Hang Seng index advanced 1.35 percent. Britain's FTSE 100 rose 3.54 percent and Germany's DAX index rose 3.33 percent. France's CAC-40 closed up 3.37 percent.

Stocks Finish Higher After Fitful Day

Wall Street finished moderately higher in fitful trading Thursday as investors, still nervous about the economy, decided to buy back into a stock market pummeled by three straight days of losses.

With the market having largely priced in the possibility of a recession, many believe there are plenty of valuable stocks at cheap prices. Before Thursday, the Dow Jones industrial average had fallen this week by 543 points, or 4.26 percent, giving up all of last week's sharp gains.
Though the market ended up rising Thursday, trading was extremely fickle due to a batch of gloomy data that included declining January sales at major retailers, a drop in December sales of pending homes, and a disappointing outlook from Internet networking supplier Cisco Systems Inc. The major indexes seesawed throughout the day.

"We're kind of trying to create a silk purse out of a sow's ear here," said Hugh Johnson, chief investment officer of Johnson Illington Advisors. "The earnings are lousy, the economic numbers are lousy."

The Dow rose 46.90, or 0.38 percent, to 12,247.00 after trading down about 80 points and up about 130. The index remains more than 13 percent below its record close on Oct. 9, 2007 of 14,164.53.

Broader stock indicators also recovered some ground. The Standard & Poor's 500 index rose 10.46, or 0.79 percent, to 1,336.91. The technology-heavy Nasdaq composite index rose 14.28, or 0.63 percent, to 2,293.03.

Government bonds fell. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.76 percent from 3.60 percent late Wednesday.

Investors may have been encouraged to buy back into stocks due to a rise in the dollar, whose decline over the past several months has contributed to worries about inflation and a possible drop in foreign interest in U.S. investments.

Peter Cardillo, chief market economist at Avalon Partners, said the dollar's advance followed remarks by European Central Bank chief Jean-Claude Trichet that the United States and Europe remain economically intertwined. This suggested to investors that strength in other countries can help stabilize the United States during its rough patch. Fears of a global economic slowdown have been weighing on stocks around the world.

As expected on Thursday, the Bank of England lowered its key interest rate by a quarter percentage point to 5.25 percent, its second cut in three months, while the European Central Bank left its key rate unchanged at 4 percent.

Another argument for bargain hunting Thursday was that the recent spate of negative economic data raises the likelihood of the Federal Reserve lowering interest rates again to spur growth. Atlanta Fed President Dennis Lockhart said Thursday the Fed's "focus, religiously, is on the general economy, the real economy."

Moreover, the stock market often portends economic declines, rather than the other way around.

"Stocks do worse during times of slow growth than they do during recession," said Brian Gendreau, investment strategist for ING Investment Management. "If we're in a shallow and short recession, for all anyone knows, we might be halfway through."

The market's indecisive movements throughout the day show, however, that it has not moved past the many worries swirling about personal spending, the crumpling housing market and deteriorating conditions in consumer credit.

Late Wednesday, Internet networking supplier Cisco Systems Inc. issued a 10 percent sales growth forecast for its current quarter that fell well below the 15 percent Wall Street projected. But Cisco finished up 30 cents at $23.38, after some investors saw the stock was undervalued.
And in a counterintuitive move, retail stocks -- also regarded as cheap right now -- rose even after the nation's retailers logged their worst January in about 40 years. Wal-Mart Stores Inc. reported a 0.5 percent rise in January same-store sales, or sales at stores open for at least a year, while Target Corp., Gap Inc., Limited Brands Inc. and AnnTaylor Stores Corp. each said their sales fell.

Not all news about retailing was bad -- J.C. Penney Co. raised its earnings forecast for the last three months of 2007. Its stock jumped $3.72, or 8.5 percent, to $47.44.

But on top of the mostly weak retail reports, the Labor Department reported that jobless claims fell last week by 22,000, a smaller decline than many economists predicted, and the National Association of Realtors said pending sales of existing homes fell 1.5 percent in December.

Light, sweet crude oil rose 97 cents to settle at $88.11 a barrel on the New York Mercantile Exchange. Gold prices also climbed.

Oil prices had been gradually declining, so it's possible a slower economy is keeping inflation from accelerating. Still, many market participants are anxious about how much longer the Fed can continue to lower interest rates given relatively high food and energy costs.

The Russell 2000 index of smaller companies rose 10.29, or 1.49 percent, to 702.78.
Advancing issues outnumbered declining shares by nearly 2 to 1 on the New York Stock Exchange, where consolidated volume came to 4.44 billion shares, down from 3.89 billion on Wednesday.

Overseas, many Asian markets were closed for a holiday, but Japan's stock market was open and its Nikkei average rose 0.82 percent. In Europe, Britain's FTSE 100 fell 2.58 percent, Germany's DAX index fell 1.66 percent, and France's CAC-40 fell 1.92 percent.

Oil Prices Fall Below $89 a Barrel

Oil prices seesawed Monday as gains in global stock markets failed to cancel out worries of a possible U.S. recession that would stunt oil demand.

European stock markets rose again, following last week's rise on Wall Street.

By the afternoon in Europe, London's FTSE index was up 0.5 percent, the CAC-40 in Paris gained 0.7 percent and Frankfurt's DAX was 1.2 percent higher.

Asian stock markets also climbed Monday. China's benchmark Shanghai Composite Index rose 8.1 percent, Hong Kong's Hang Seng index jumped 3.8 percent and Japan's Nikkei 225 index rose 2.7 percent.

Energy investors often view stocks as a proxy for economic growth, and in some recent sessions, movements in the oil market have closely followed that of global equities.

But Monday investors appeared to remain focused on weak economic data in the U.S. that pushed oil futures down nearly $3 a barrel at the end of last week.

"The high volatility in equities at a time when the oil markets are lacking a clear fundamental picture, has led to a greater oil-to-equity correlation in recent weeks," said Olivier Jakob of Petromatrix in Switzerland.

Light, sweet crude for March delivery was down 13 cents to $88.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier Monday, the contract rose as high as $89.39 but also was as low as $88.07.

In London, Brent crude futures rose 1 cent to $89.45 a barrel on the ICE Futures exchange.
The Nymex contract dropped $2.79 to settle at that level Friday after the U.S. Labor Department reported that employers cut 17,000 jobs last month, the first reduction in more than four years and a sign that the economy continues to weaken.

Construction spending also fell by a record amount, according to the Commerce Department, reflecting a sharp pullback in residential building.

Responding to recent oil price declines, the Organization of Petroleum Exporting Countries said Friday it will maintain current oil output levels due to concerns that a weakening global economy will result in softer demand.

However, looking ahead to the next meeting in March, Qatar's Abdullah bin Hamad Al Attiyah said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.

Other issues affecting the market were an attack by Turkish troops on Kurdish rebel targets in northern Iraq and a battle between gunmen and government troops near a petroleum-pumping station in Nigeria's lawless southern oil region.

Neither incident appeared to have disrupted oil flows, but analysts said both were causes for concern.

Heating oil futures rose 0.06 cent to $2.4495 a gallon while gasoline prices fell 0.02 cent to $2.2832 a gallon and Natural gas futures lost 7.9 cents to $7.661 per 1,000 cubic feet.