Stock Market Turns Around
Kurt Brouwer February 22nd, 2008
U.S. Stocks Gain, Erasing Decline, on Report Of Ambac Bailout (Bloomberg, February 22, 2008, Michael Patterson)
“U.S. stocks rose, erasing earlier declines, on speculation Ambac Financial Group Inc. may be bailed out next week.
Ambac, the second-largest bond guarantor, led a rebound in financial stocks after CNBC said bankers working on the deal have made “significant” progress in shoring up the company’s finances. The Dow Jones Industrial Average fell as much as 129 points earlier on concern that profits at brokerage firms will decline and dropping demand for mortgages will curb growth at Fannie Mae and Freddie Mac.
“If Ambac gets bailed out it would imply that the market’s not going to zero and the world’s not coming to an end,” said Andy Brooks, head equity trader at T. Rowe Price in Baltimore, which has more than $300 billion in assets.
The Standard & Poor’s 500 Index climbed 10.26 points, or 0.8 percent, to 1,352.79 at 3:58 p.m. in New York, erasing a weekly decline. The Dow Jones Industrial Average added 93.95, or 0.8 percent, to 12,378.25. The Nasdaq Composite Index increased 1.74, or 0.1 percent, to 2,301.52 About two stocks gained for every one that fell on the New York Stock Exchange. Shares in Asia and Europe fell.
Ambac climbed $1.62, or 18 percent, to $10.85 after CNBC on-air editor Charles Gasparino said the bailout may be announced on Monday or Tuesday, citing bankers working on the deal. Gasparino also said “the entire deal could fall apart.”…
Not exactly my idea of a high quality rally, but it was quite a comeback there at the close.
There were two timeless quotes in the article. For example, the stirring cry of the T. Rowe Price guy, “…it would imply the market’s not going to zero…” I also like Gasparino’s comment at the end, “…the entire deal could fall apart.”
No doubt. Although I would guess that this kind of a rally suggests that the deal is pretty solid. We’ll see.
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