Lower borrowing costs, bond bailout help boost shares
new york — Stocks rallied on Wednesday the most in two months on speculation lower borrowing costs and a plan to bail out bond insurers will restore confidence in the financial system.
Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., the largest U.S. banks, helped the Dow Jones industrial average erase a 326-point loss and sparked the biggest advance in financial shares in five years. Centex Corp. and D.R. Horton Inc. led house builders to their steepest gain since at least 1994 on expectations the Federal Reserve’s surprise 0.75 percentage point rate cut Tuesday will spur construction.
The Standard & Poor’s 500 index added 28.08 to 1,338.58, its first advance in six days. The Dow rose 298.98 to 12,270.17. The 30-stock gauge climbed 632 points from its low of the day to its high, marking its biggest swing since July 2002. The Nasdaq composite index increased 24.14 to 2,316.41.
Benchmark indexes posted a rally in the final hour of trading that erased declines spurred by forecasts of slowing sales at Apple Inc. and Motorola Inc.
Apple tumbled $16.64, or 11 percent, to $139, its biggest drop since July 2002. CEO Steve Jobs spooked investors by failing to meet the most optimistic projections for first-quarter profit and forecasting slower sales growth.
Motorola retreated $2.31, or 19 percent, to $10.01 in its biggest loss since 2002. The company forecast a loss for the first quarter after posting an 84 percent drop in fourth-quarter profit.
JPMorgan increased $4.86, or 12 percent, to $45.72, its steepest gain since 2002. Bank of America added $3.18, or 8.5 percent, to $40.57, its biggest rally in eight years cashadvance. Citigroup advanced the most since October 2002, climbing $1.96 to $26.36.
Ambac Financial rallied $5.73, or 72 percent, to $13.70. MBIA Inc. increased $4.08 to $16.61.
Centex, the third-largest house builder by revenue, climbed $4.55, or 20 percent, to $27.22. D.R. Horton, the fourth-biggest, added $1.55, or 12 percent, to $14.45.
Tyco International Ltd. climbed $2.68, or 8 percent, to $36.40. The world’s biggest maker of security and fire systems raised its 2008 forecast.
United Technologies Corp. climbed $3.74 to $70.98 for the biggest rise since April 2006. The maker of Otis elevators, Pratt & Whitney jet engines and Sikorsky helicopters said fourth-quarter profit rose 23 percent.
EBay Inc. advanced $1.81 to $28.94. The largest Internet auction site gave up all of the gains in extended trading after forecasting 2008 sales and profit that trailed some estimates.
Google Inc. slumped $35.73, or 6.1 percent, to $548.62 for the biggest decline since February 2006. UBS AG said it was "cautious" on the company’s fourth-quarter earnings. Google will report after markets close Jan. 31.
Freeport-McMoRan Copper & Gold Inc., the world’s second- biggest copper miner, declined $4.22 to $77.30 after fourth-quarter profit fell 2.8 percent.