A triple-digit rally on Wall Street pushed global markets solidly into positive territory on Tuesday.
European stocks pushed higher in early trading. London, Paris and Frankfurt were all up more than 2.5 percent. In Asia, Tokyo’s Nikkei average picked up 3.3 percent, and Australia’s All Ordinaries index closed 1 percent higher. In Seoul, the KOSPI gained 1.9 percent, while Hong Kong’s Hang Seng index picked up nearly 3 percent. Wall Street stocks bounded upward Monday, energized by the U.S. Treasury’s plan to buy billions of dollars in bad bank assets and a better-than-expected existing home sales report. The Dow Jones industrial average gained 497 points, seeing its biggest one-day point gain since November 21. The gain was equivalent to 6.8 percent, which was the biggest one-day percentage gain since October 28. The Standard and Poor 500 index rose 54 points, its best one-day point gain since November 13. The percentage gain of 7.1 percent was the best since October 28. The Nasdaq composite added 99 points, or 6.8 percent, for the best one-day point and percentage gain since October 28.
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“I think the stock reaction is a vote of confidence in the plan,” said Jack Ablin, chief investment officer at Harris Private Bank. He said the stock market was also reacting well because the plan is skewed in favor of the private investor, who has to be responsible for only about 7 percent of the total in any transaction. But other analysts were less sanguine. “The plan is a rehash of what we’ve seen before and it still doesn’t resolve the issue of how to value the bad assets,” said Stephen Leeb, president of Leeb Capital Management. “There’s a lot of cash on the sidelines. There’s a real wish to believe that this is a solution. And there has been some good news on the economy lately,” he said. “All of that is contributing to a rally as well.” Stocks have gained for the past two weeks, despite tumbling last Thursday and Friday. But that retreat gave investors an opportunity to jump back in Monday, with bank shares leading the advance. Since tumbling to 12-year lows two weeks ago, the S&P 500 has now rallied 18 percent as of Monday’s close, blasting through 800, a key resistance level that analysts have been watching. Tuesday brings more key economic news from Washington. President Barack Obama was to deliver a televised address during prime time, while Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner were expected to testify at a House Financial Services Committee hearing on AIG. Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, was also to testify at a Senate Banking Committee hearing on bank regulation. A large part of Monday’s rally was fueled as the Treasury rolled out its long-awaited plan to purge bank balance sheets of as much as $1 trillion in sour assets that are limiting lending and prolonging the recession. The government will commit $75 billion to $100 billion of taxpayer money to launch the Public-Private Investment Program, which seeks to create a market for that bad debt. Watch Obama explain the plan on his 63rd day in office » The government plans to run auctions between the banks looking to unload the bad assets — such as subprime mortgages — and the investors looking to buy them. The Federal Reserve and the Federal Deposit Insurance Corporation will be involved.
Economists have said stabilizing the banking system was key to stabilizing the economy. Also boosting Wall Street were existing home sales, which rose 5.1 percent in February, according to the National Association of Realtors. Economists surveyed by Briefing.com had expected sales to dip.