Stocks are posting massive gains in early afternoon trading on Monday, as investors respond to Treasury Secretary Tim Geithner's plan to help the banking sector. Better-than-expected existing home sales data has also generated some buying interest.
Geithner's plan will involve setting up an investment fund to buy mortgage-related securities and other assets that are driving down the balance sheets of 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.
Uncertainty is still plaguing the program, however. Potential investors feel that if the prices of the assets are too high, private money won't come in, and if they are too low, banks will refuse to sell.
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 unexpectedly rose in the month of February, according to a report released by the National Association of Realtors on Monday, with sales rebounding after hitting a twelve-year low in the previous month.
The report showed that existing home sales rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February 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 but still pleased investors. Comparable stores sales increased 1.3 percent in the quarter, while comparable store front-end sales decreased 1.2 percent.
The company reported that its second quarter net earnings decreased to $0.65 per share, from $0.69 per share in the same quarter a year ago. The company noted that the results for the latest quarter included a negative impact of $0.06 per share in costs and $0.02 in savings associated with the company's Rewiring for Growth restructuring program.
The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is currently up 309.19 at 7,587.57, the Nasdaq is up 58.45 at 1,515.72 and the S&P 500 is up 33.60 at 802.14.
While banking stocks continue to lead the broader markets higher, standout gains are also being shown by stocks in the brokerage sector, with the Amex Securities Broker/Dealer Index up 7.8 percent on the day.
Within the brokerage sector, E*Trade Financial (ETFC) is turning in one of the strongest performances of the day, rising 11 percent. With the advance, the stock has climbed to its highest level in about a month and a half.
Resource stocks are also showing considerable strength on the day, with steel and oil services stocks posting particularly strong gains. The Amex Steel Index and the Philadelphia Oil Services Index are up 8.3 percent and 7.8 percent, respectively.
Additionally, electronic storage, railroad, and housing stocks are also experiencing substantial strength on the day. Most of the other major sectors have also shown strong upward moves, reflecting broad based strength in the markets.
Stocks In The News
Among individual stocks, Tiffany & Co. (TIF) is up 14.2 percent on the day after the company released quarterly results that pleased investors. With the advance, the stock has climbed to its highest level since the beginning of February.
The company reported fourth quarter net earnings of $0.25 per share, compared to $0.96 per share in the prior year quarter. Excluding one-time items, earnings came in at $0.85 per share. Net sales for the quarter declined to $841.2 million from $1.05 billion in the year ago quarter.
Additionally, Cox Radio Inc. (CXR) is up 22.7 percent on the day after Cox Enterprises Inc. announced that it is commencing a cash tender offer for all of the outstanding publicly held minority interest for Cox Radio. The deal is for $3.80 per share in cash, or a total payment of about $69.1 million, including fees and expenses.
Meanwhile, H&R Block Inc. (HRB) is down 4.8 percent after the company said that total returns prepared by the company for the period through March 15 were 3.2 percent lower than in the comparable period last year.
In overseas trading, stock markets across the Asia-Pacific region closed notably higher on Monday, with Japan's benchmark Nikkei 225 Index closing up 3.4 percent.
The major European markets are also continuing to see substantial strength. The U.K.'s FTSE 100 Index is up 3.1 percent, while the French CAC 40 Index and the German DAX Index are both up 2.7 percent.
In the bond market, treasuries are seeing modest weakness amid the rally among stocks. Subsequently, the yield on the benchmark 10-year note is up 1.7 basis points at 2.642 percent.
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