UNITED States stocks posted the first weekly gain of 2008 after a surprise interest-rate cut and government plan to revive growth improved prospects the economy may skirt a recession, helping shares rebound from their worst yearly start.
The rise, led by the biggest climb in almost five years for financial shares, including Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc, was limited as the Standard & Poor's 500 Index tumbled again on Friday on concern the Federal Reserve won't lower borrowing costs enough to stimulate an expansion, Bloomberg News said.
The S&P 500 is still down 9.4 percent for the year, while the Dow Jones Industrial Average has dropped eight percent. Stock market volatility in the US climbed to the highest in five years last Tuesday, a day after the MSCI World Index had its biggest rout since 2002 on concern global growth is slowing.
"We're in the bottoming process and that's not a quiet, soft or demure thing," said Brian Barish, president of Denver-based Cambiar Investors. "It's violent, nasty and you have wild moves as stocks are under ferocious liquidation pressures."
The S&P 500 added 0.4 percent to 1,330.61 for the week, boosted by the steepest-ever weekly gain in homebuilding shares. The Dow average climbed 0.9 percent to 12,207.17. The Nasdaq Composite Index posted its fifth straight weekly loss, declining 0.6 percent to 2,326.2 as shares of Apple Inc lost 19 percent.
From their low, futures on the S&P 500 gained 7.7 percent for the three days starting last Tuesday, boosted by the Fed's 0.75 percent interest rate cut and a plan by New York regulators to arrange the rescue of MBIA Inc and Ambac Financial Group Inc, the two biggest bond insurers.
The S&P 500 Financials Index increased 7.1 percent, the most since March 2003. Bank of America surged 9.8 percent to US$39.48, JPMorgan gained 10 percent to US$43.64 and Citigroup added nine percent to US$26.64.
The Fed reduced its overnight lending rate between banks by the most in 23 years, citing "a weakening of the economic outlook and increasing downside risks to growth." Policy makers are scheduled to meet again this week and will probably cut the rate another quarter point to 3.25 percent, according to futures trading and the average economist forecast in a Bloomberg survey.
Lennar Corp, the biggest homebuilder, soared 31 percent to US$16.98. The S&P 500 Homebuilding Index advanced 28 percent, the most in the measure's 18-year history.
The accord reached in Washington would temporarily raise the limit on the size of mortgages that federally chartered mortgage-finance companies Fannie Mae and Freddie Mac can buy to US$729,750 from US$417,000, aiding the housing market.
President George W. Bush and House lawmakers also agreed on a US$150 billion economic stimulus consisting of about US$100 billion in tax rebates to families and US$50 billion for business tax breaks.
"We were in a crisis of confidence, so any way to make people feel a little more comfortable and improve the confidence of investors is a huge positive," said Eric Green, senior managing partner at Penn Capital Management in Cherry Hill, New Jersey.