U.S. Stocks Surge 10%, Commercial Paper Soars

123jump.com Staff
28 Oct, 2008
New York City

U.S. stocks surged on the hopes that the Fed will lower rates tomorrow. The Fed lent money directly to corporations for the first time in commercial paper market. The Fed participation lifted the debt amount to $67 billion, a ten-fold rise from a week ago. Brazil, Germany Mexico surged above 10%.

4:30PM New York, 10:30AM Frankfurt, 6:30AM Sydney[R]– U.S. stocks rallied after the Fed action lifts commercial paper market. Investors speculated a rate cut at the end of the 2-day meeting tomorrow. Market index in the U.S., Germany, Brazil and Mexico surged above 10%. Yen hovers near 13-year high against dollar.[/R]

Global Markets

U.S. stocks surged on the hopes that the Fed will lower rate by at least 50 basis points at the end of two-day meeting tomorrow. Financials and real estate companies rallied. Of the stocks in S&P 500 index, 489 closed higher and in 30 stocks in Dow Jones index all closed higher. Insurance, financials and real estate and retail related stocks surged.

The Fed purchasing power was evident in the commercial paper market that has seen sharp tightening conditions of credit. According to the latest data available on the Fed Web site, 1,511 issues from corporations were completed and raised $67.1 billion. The Fed is assumed to be the buyer of most of these debts. Only a week ago, 340 companies raised $6.7 billion and for the week ending on October 10, 101 companies raised $2.4 billion.

The troubled auto companies lending arms may have taken advantage of the Fed participation in commercial paper market. GMAC spokeswoman Gina Proia in an interview with Bloomberg News confirmed that the company had participated in the program. It is not clear if Ford Motor Credit, Chrysler Financial and lending arms of Toyota, Honda and Nissan participated in the program. General Electric, Morgan Stanley, Citigroup, Bank of America and Wells Fargo are few of the companies participating in the program.

Stocks in Tokyo closed up 6% after a rebound in the afternoon session. The yen fell from its record high against euro and 13-year high against dollar. September retail sales in Japan dropped 0.4%. Honda Motor lowered its forecast for full year net and second quarter net dropped 41%.

In Australia, Queensland Gas agreed to be acquired by UK based BG Group in a deal that values the company at $5.6 billion. The all cash offer will increase BG stake to 100%. Australian dollar regained some of the lost ground against yen and the U.S. dollar. Stocks edged lower.

Stocks in Hong Kong surged 14% in a largest one day rally in 11 years. The Hang Seng index had dropped 28% in the last five sessions. Cathay Pacific and China Railways surged 30% after crude oil weakened in the region. In Shanghai trading CSI 300 Index soared 3.1%.

UK stocks closed 1.8% higher on strong earnings from BP Plc and positive outlook from Standard Chartered. The market gains were trimmed after a record drop in consumer confidence in the U.S. UK home repossessions rose 71% in the second quarter. Schroders Plc net dropped 20% in the third quarter.

North American Markets

Dow Jones Industrial Average soared 889.35 or 10.9% to a close of 9,065.12, S&P 500 Index closed up 91.59 or 10.8% to 940.51, and Nasdaq Composite Index increased 143.57 or 9.5% to close at 1,649.47. In Toronto, TSX Composite Index surged 614.29 or 7.2% to 9,151.39.

Of the 30 stocks in Dow Jones Industrial Average all closed higher and 21 stocks closed at least 10% higher.

Alcoa Inc led gainers in the Dow Jones Industrial Average with a rise of 19.3% followed by gains in Boeing Company of 15.5%, in General Motors of 14.7%, in Verizon Communication of 14.6%, in Citigroup Inc of 14.3% and in Home Depot Inc of 14.1%.

Of the stocks in S&P 500 index, 489 increased, 11 declined and none was unchanged. Of the index stocks, 8 rose more than 3% and 418 fell more than 3%. And 101 declined more than 10%.

Convergys Corp led decliners in the S&P 500 index with a plunge of 27.8% followed by losses in Whirlpool Corp of 8.3%, in E*Trade Financial of 7%, in Legg Mason Inc of 6.6%, in King Pharmaceuticals of 4.8% and in Ciena Corp of 3.8%.

General Growth Properties led the gainers in the S&P 500 index with a surge of 72.1% followed by gains in AIG of 35.6%, in Interpublic Group of 35.2%, in Developers Diversified of 32%, in Invesco Ltd of 28%, in Kimco Realty of 28.1%, in Fidelity National of 27% and in CB Richard Ellis of 26.3%.

South American Markets Indexes

Brazil led gainers in the region with a surge o 13.4% followed by increase in Mexico of 10.5%, in Argentina of 6.6%, in Colombia of 3.1% and in Chie of 1.8%. Venezuela fell 0.6%.

Europe Markets Review

In London FTSE 100 Index closed higher 73.79 or 1.92% to 3,926.38, in Paris CAC 40 Index increased 47.57 or 1.55% to close at 3,114.92 and in Frankfurt DAX index higher 488.81 or 11.28% to close at 4,823.45. In Zurich trading SMI increased 37.60 or 0.68% to close at 5,538.54.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 459.02 or 6.41% to 7,621.92, Hang Seng index in Hong Kong increased 1,580.45 or 14.35% closed to 12,596.29. CSI 300 index in China higher 51.15 or 3.09% closed to 1,705.82. ASX 200 index in Australia decreased 14.60 or 0.38% to close 3,794.60. The KL Composite index in Malaysia lower 26.67 or 3.10% closed to 832.44.

The Kospi Index in South Korea increased 52.71 or 5.57% to close at 999.16. SET index in Thailand closed higher 10.61 or 2.74% to 398.04 and JSE Index in Indonesia decreased 55.02 or 4.72% to 1,111.39. Markets in India were closed today.

Commodities, Metals, and Currencies

Crude oil decreased $0.49 to close at $62.73 a barrel for a front month contract, natural gas increased 6 cent to $6.19 per mBtu and gasoline futures increased 2.06 cents to close at 149.75 cents per gallon.

Wheat futures closed down 15.5 cents in Chicago trading and closed at $5.14 a bushel. Sugar increased 0.18 cent to 11.14 cents a pound. Soybean future closed down 9.50 cents to $8.888 a bushel.

Gold increased $3.40 in New York trading to close at $746.30 per ounce, silver closed down 0.05 cents to $9.19 per ounce and copper for the front month delivery increased 12.80 cent to $1.93 per pound.

Dollar edged lower against euro to $1.2758 and surged against yen to 98.82.

Yields on 10-year U.S. bonds increased to 3.83% and with 30-year maturities increased to 4.19%.