Wall Street returns to more normal week
NEW YORK -- Wall Street ended its calmest week in a month with a big advance Friday, rising on solid economic readings that countered the bleak sentiment that has blanketed the financial markets. The Dow Jones industrial average rose more than 140 points in a lightly traded session.
Stocks started out flat but jumped following a stronger-than-expected reading on new homes sales for July. That report came after a reading showing orders to factories for big-ticket goods rose sharply last month.
The stock market's gains Friday after several stable or positive sessions suggested that Federal Reserve policymakers and stock market investors have perhaps struck a truce -- maybe only a tenuous one -- with the Fed acknowledging it stands ready to try to fend off a calamitous seizing up of the credit markets and investors willing to focus on readings on the health of the economy before making decisions.
After weeks of volatility in which triple-digit drops in the Dow became the norm, stocks showed more modest action this week. Investors tried to gain perspective on the troubles in the subprime mortgage market, which serves borrowers with weak credit, and the credit markets as a whole.
The Dow rose 142.99, or 1.08 percent, Friday, closing at 13,378.87.
Broader stock indicators also advanced sharply. The Standard & Poor's 500 index rose 16.87, or 1.15 percent, to 1,479.37. The Nasdaq composite index rose 34.99, or 1.38 percent, to 2,576.69.
Moves by some investment banks this week to invest in subprime lenders and to borrow money from the Fed advanced a sense that the credit market troubles could be contained. A bit of merger news -- often a catalyst for sending stocks higher -- helped embolden some investors.
"I think we've stabilized a bit since the Fed has lowered the discount rate," said Nicholas Raich, director of research at National City Private Client Group in Cleveland, referring to the Fed's decision a week ago to cut the interest it charges to lend directly to banks. "That has calmed the market and eased some fears because we have a Fed that is willing to step in and help out."