US stocks make strong gains on possible rescue plan

Business Materials 19 September 2008 02:27 (UTC +04:00)

US stocks posted significant gains on Thursday, the latest swing in a topsy-turvy week on Wall Street amid a burgeoning financial crisis and massive government interventions aimed at preventing wider economic fallout.

The markets appeared to be buoyed by talk of a more permanent solution to the financial turmoil after US legislators indicated a willingness to create a new government agency that would take on the bad loans of struggling banking firms.

US and British regulators also helped spark a late afternoon rally by announcing crackdowns on so-called short-selling, a stock trading technique that has helped fuel the sell-off on Wall Street this week.

President George W Bush sought to reassure investors that the government would take appropriate action while the Federal Reserve - in conjunction with five of the world's top central banks - injected nearly 250 billion dollars of extra liquidity into the financial system early Thursday.

The Dow Jones Industrial Average surged 410.03 points, or 3.86 per cent, to 11,019.69. The broader Standard & Poor's 500 Index jumped 50.12 points, or 4.33 per cent, to 1,206.51. The technology-heavy Nasdaq Composite Index shot up 100.25 points, or 4.78 points, to 2,199.10.

American International Group Inc (AIG), the world's largest insurer, was removed from the Dow in light of the government's 85- billion-dollar takeover Tuesday night. Kraft Foods Inc took its place, and its stock rose 2.9 per cent.

The US currency stood at 69.74 euro cents and 105.58 Japanese yen. Gold dropped 5.80 dollars to 844.70 dollars per fine ounce, after posting its largest one-day surge in nine years on Wednesday.

The Dow tumbled more than 4 per cent and the S&P 500 fell 4.7 per cent on Wednesday as investors feared more banks could lack the capital to remain solvent in the ongoing credit crisis.

Morgan Stanley, one of only two remaining independent investment banks on Wall Street, was in talks with Wachovia Corp about a possible takeover, US media reported Thursday. It was also talking with the Chinese state investment fund about increasing its share in the firm, dpa reported.