Stocks rise after Morgan Stanley reports 4Q loss but $5B investment
NEW YORK -- Stocks rose Wednesday as investors awaiting results from the Federal Reserve credit auction held Monday were cheered by a $5 billion investment from China in Morgan Stanley.
Because of its losing bets on mortgages, Morgan Stanley was forced to take a much larger-than-expected writedown of $9.4 billion, which led to a quarterly loss. The investment bank's shares rose in early trading, though, with investors pleased to hear that the company got a $5 billion investment from China's government-controlled investment vehicle, China Investment Corp.
Investors were also interested to see how much of the $20 billion the Fed offered in 28-day credit on Monday was taken by commercial banks. It's hard to say how Wall Street will interpret results; strong interest on the part of commercial banks could be seen as desperation, or weak interest could be viewed as a signal that the Fed's move was ineffective.
The Dow Jones industrial average rose 38.53, or 0.29 percent, to 13,271.00.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 3.75, or 0.26 percent, to 1,458.73, and the Nasdaq composite index rose 8.36, or 0.32 percent, to 2,604.39.
Government bond prices rose. The yield on the 10-year Treasury note, which moves opposite the price, fell to 4.10 percent from 4.12 percent late Tuesday.
On Tuesday, stocks finished higher on relief that the European Central Bank was willing to issue $500 billion in 16-day loans to banks, but it was a volatile, back-and-forth session due to concerns about the prospect of a U.S. recession next year.
The earnings data that Wall Street digested Wednesday was, for the most part, disappointing.
Morgan Stanley rose 49 cents to $48.56 after releasing its earnings report.
Palm Inc., the maker of the Treo and Centro smart phones, said late Tuesday it swung to a loss in the most recent quarter. Its shares dropped 52 cents, or 8.5 percent, to $5.41.
Hovnanian Enterprises Inc. also posted a quarterly loss after facing a difficult housing market in the fourth quarter. The homebuilder's shares fell 70 cents, or 8.3 percent, to $7.71.
General Mills Inc. said profit in the most recent quarter edged higher, but the cereal and packaged food maker's results were dampened by soaring ingredient costs and other expenses. General Mills fell 29 cents to $58.78.
The dollar rose against other most major currencies, except the yen. Gold prices fell.
Light, sweet crude rose 71 cents to $90.79 a barrel in premarket trading on the New York Mercantile Exchange.
There was little in the way of economic data due Wednesday, but Wall Street will be paying attention when Treasury Secretary Henry Paulson speaks in Los Angeles about trade, and when Richmond Fed President Jeffrey Lacker speaks in Charlotte, N.C., on the outlook for the U.S. economy.
Overseas, Japan's Nikkei stock average fell 1.17 percent, and Hong Kong's Hang Seng index rose 1.11 percent. Britain's FTSE 100 rose 0.25 percent, Germany's DAX index rose 0.23 percent and France's CAC-40 rose 0.27 percent.