Market Watch

Reuters
Banks' shares push stocks up, easing mortgage woes
Thursday March 15, 6:08 pm ET
By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks finished higher on Thursday after healthy earnings from Bear Stearns Cos. Inc. (NYSE:BSC - News) eased concerns about subprime lending problems spreading to other companies and the wider economy.

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A spate of mergers, including a surprise offer by the electronic energy marketplace IntercontinentalExchange (NYSE:ICE - News) for CBOT Holdings Inc. (NYSE:BOT - News), the parent of the Chicago Board of Trade.

Bear Stearns, Wall Street's leading underwriter of mortgage-backed securities, said quarterly earnings rose, beating analysts' estimates, and noted that problems with risky mortgages were largely contained. Lehman Brothers Holdings Inc. (NYSE:LEH - News) made similar comments a day earlier.

"Everybody was so hopped up with the subprime lending stuff. But the economy is doing OK, and I still think the market in the long run will have a halfway decent year," said Victor Pugliese, director of listed equity trading at First Albany Corp. in San Francisco.

The Dow Jones industrial average (DJI:^DJI - News) rose 26.28 points, or 0.22 percent, to 12,159.68. The Standard & Poor's 500 Index (^SPX - News) gained 5.11 points, or 0.37 percent, to at 1,392.28. The Nasdaq Composite Index (Nasdaq:^IXIC - News) advanced 6.96 points, or 0.29 percent, to 2,378.70.

WELLS FARGO GAINS, CBOT JUMPS

Financial stocks, which were among the hardest hit in a sell-off on Tuesday, rose for a second day. Shares of Wells Fargo & Co. (NYSE:WFC - News), the No. 5 U.S. bank, gained 1.3 percent, or 45 cents, to $34.10 on the New York Stock Exchange, while shares of Countrywide Financial Corp. (NYSE:CFC - News), which like Wells Fargo made mortgages to subprime borrowers, rose 3.1 percent, or $1.08, to $35.47, also on the NYSE.

Shares of Bear Stearns shot up 2.2 percent, or $3.21, to $148.50, while shares of Lehman rose 1.8 percent, or $1.31, to $73.03.

The bid by ICE pushed CBOT shares up 17.4 percent, or $28.86, to $194.95 on the New York Stock Exchange. CBOT's stock was the second-biggest percentage gainer on the big Board.

In contrast, shares of IntercontinentalExchange dropped 2.9 percent, or $3.83, to $128.10.

In October, the Chicago Mercantile Exchange (NYSE:CME - News) had agreed to buy the CBOT. CME shares fell 5.5 percent, or $31.09, to $532.88.

In other merger news, Cisco Systems Inc. (NasdaqGS:CSCO - News) said it will buy online videoconferencing company WebEx Communications Inc. (NasdaqGS:WEBX - News) for $2.9 billion. Cisco shares dipped 0.2 percent, or 4 cents, to $25.81, while shares of WebEx rose 22 percent, or $10.18, to $56.38. Both trade on the Nasdaq.

BRIEF DIP ON GREENSPAN'S CAVEAT

Stocks pared gains and briefly turned negative after former Federal Reserve Chairman Alan Greenspan, speaking in Florida to the Futures Industry Association, warned that problems in the market could spread into other sectors. (ID:nN15449059)

Also, economic data before the opening somewhat dimmed hopes for an interest-rate cut by the Federal Reserve any time soon. The report showed the U.S. Producer Price Index, a gauge of wholesale inflation, jumped 1.3 percent in February, well above the gain of 0.5 percent that economists were expecting. Excluding food and energy, core PPI rose 0.4 percent.

On Tuesday, the Mortgage Bankers Association reported that the proportion of mortgages in the initial stages of foreclosure rose to the highest rate on record. Stocks fell about 2 percent that day.

Trading was light to moderate on the NYSE, with about 1.51 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.81 billion shares traded, below last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 8 to 3 on the NYSE and by about 3 to 2 on Nasdaq.