Spring Break
Stocks surge after bank plan announcement
Tim Paradis - Associated Press
Issue date: 3/24/09 Section: News
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Investors added rocket fuel Monday to a two-week-old advance, cheering the government's plan to help banks remove bad assets from their books and also welcoming a report showing a surprising increase in home sales. Major stock indicators surged more than 6 percent, including the Dow, which had its biggest percentage gain since October.
Although analysts were still hesitant to say Wall Street is squarely on its way to recovery after the collapse that began last fall, they said the banking and housing news bolstered the belief that the economy is starting to heal.
"It's just hard to argue that there isn't an improvement in economic activity on the horizon," said Jim Dunigan, executive vice president at PNC Wealth Management.
The market began turning around two weeks ago on news that Citigroup Inc. was operating at a profit in January and February. A spate of more upbeat economic reports helped the market build on its gains, although the rally stalled last Thursday and Friday.
Analysts said they saw more fundamental strength in Monday's buying than they saw at the start of the rally. Dave Rovelli managing director of trading at brokerage Canaccord Adams, said there appeared to be less short covering, which occurs when traders are forced to buy to cover misplaced bets that stocks would fall. Short covering contributed to the market's surge after the Citigroup news.
"There is definitely new buying," he said. Rovelli also said the approaching end of the quarter can make money managers eager to buy into a market to make the statements they send to clients look stronger.
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