Stocks are showing significant strength during mid-morning trading on Monday, as investors cheer the new plan for fixing the downtrodden banking sector. Some strong earnings in the retail sector and existing home sales figures are also helping to drive stocks higher.
Earlier in the day, Treasury Secretary Geithner announced his plan to help the troubled banking industry. The plan will involve setting up an investment fund to buy mortgage-related securities and other assets that are driving down the balance sheets at the banks.
The new Public Private Investment Program would combine taxpayer money with private funds, aiming to buy loans and free up banks to renew lending.
The Treasury's response involves using up to $100 billion in funds from the $700 billion financial rescue plan passed in 2008 in addition to capital from private investors to generate an estimated $500 billion to purchase the toxic assets, a number that could double to $1 trillion over time, the Treasury said.
Some skepticism still surrounds the program, however, led by worries about prices: if too high, private money won't come in, and if too low, banks won't sell the assets on their balance sheet.
The Public-Private Investment Program ensures that private sector participants invest alongside the taxpayer, with the private sector investors standing to lose their entire investment in a downside scenario and the taxpayer sharing in profitable returns, the Treasury explained.
On the economic front, existing home sales for the month of February came in considerably better than analysts had anticipated, rising to a rate of 4.72 million from a pace of 4.49 million units in January. Economists had expected sales to slip to a 4.45 million unit rate.
In corporate news, Walgreen (WAG) reported second quarter earnings that fell year-over-year due to restructuring costs, while Tiffany (TIF) reported results that came in above predictions on an adjusted basis.
Additionally, Canadian integrated oil and natural gas companies Suncor Energy (SU) and Petro-Canada (PCZ) jointly announced that the companies have agreed to merge in an all-stock deal.
The major averages have seen some further upside in recent trading, rising to new highs for the session. The Dow is currently up 276.22 at 7,554.60, the Nasdaq is up 51.03 at 1,508.30 and the S&P 500 is up 28.73 at 797.27.
In response to Geithner's plan, banking stocks are leading the climb, posting some of the biggest gains of the day. Currently, the Dow Jones Banks Index is up 11 percent on the day, bouncing back from Friday's losses and moving back towards a recent one-month closing high.
Brokerage stocks are also posting considerable gains on the day, as reflected by the 7.8 percent gain being shown by the Amex Securities Broker/Dealer Index.
Additionally, with upgrades to both Duke Realty (DRE) and AMB Property (AMB), real estate stocks are climbing notably higher. The Morgan Stanley REIT Index is up 5.8 percent on the day.
Oil services, steel, and natural gas stocks are also climbing higher, as investors respond to some strength in commodity prices. The Philadelphia Oil Services Index is up 8 percent, while the Amex Steel Index and the Amex Natural Gas Index are up 7.1 percent and 6.3 percent, respectively.
With the substantial gains in the broader markets, most of the other major sectors are also posting strong gains.
Stocks Driven By Analyst Comments
Agilent (A) is posting a gain of 7.6 percent after the stock was upgraded to Outperform from Neutral at Credit Suisse. With the advance, the stock has risen to its highest level in over a month.
The upgrade came as analysts see improving demand for the company and limited downside. The price target was also raised to $20 from $15.
Additionally, Corning (GLW) is up 3.9 percent after being upgraded to Buy from Hold at Citigroup. Further, the stock's target price was raised to $16.00 from $11.25 and its 2009 EPS estimates were lifted to $0.70 from $0.51.
Meanwhile, O'Reilly Automotive (ORLY) is suffering a loss of 4.2 percent after being downgraded to Neutral from Buy at UBS. The downgrade and decline come despite the fact that its 2009 EPS estimates were raised to $1.90 from $1.85.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Monday, with resource and financial stocks leading the way. Japan's benchmark Nikkei 225 Index showed a strong upward move, closing up 3.4 percent.
The major European markets are also seeing considerable strength. The U.K.'s FTSE 100 Index is up 2.1 percent, while the French CAC 40 Index and the German DAX Index are posting gains of 1.9 percent and 2 percent, respectively.
In the bond market, treasuries are showing considerable uncertainty. Currently, the yield on the benchmark 10-year note is down less than a basis point at 2.616 percent.
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