Investors reverse course on Ambac news
NEW YORK -- Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week.
The major indexes were narrowly mixed following a week of choppy trading.
CNBC reported shortly before the closing bell that a plan to help shore up the finances of Ambac Financial Group Inc. could be announced Monday or Tuesday. Ambac shares jumped on the report and finished up $1.48, or 16 percent, at $10.71.
The market's turnaround came after nearly two full days of selling.
The Dow Jones industrial average had been down nearly 130 points Friday, but by the close, showed a 225-point reversal from its lows of the session.
"There's probably some validity to the rumors," said Jim Herrick, manager of equity trading at Baird & Co., referring to traders' speculation about Ambac. "With the overall financial crunch we've experienced, this brings new confidence in the sector."
The Dow rose 96.72, or 0.79 percent, to 12,381.02.
Broader stock indicators also moved higher. The Standard & Poor's 500 index rose 10.58, or 0.79 percent, to 1,353.11, and the Nasdaq composite index rose 3.57, or 0.16 percent, to 2,303.35.
For the week, the Dow edged up 0.27 percent, while the S&P 500 rose 0.23 percent and the Nasdaq lost 0.79 percent.
The market's early decline followed a sell-off Thursday that left the Dow down more than 140 points, or 1.15 percent.
Bond prices reversed alongside stocks. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.81 percent from 3.78 percent late Thursday.
The dollar was mixed against other major currencies, while gold prices fell.
In corporate news, Merrill Lynch lowered its ratings on government-sponsored lenders Freddie Mac and Fannie Mae to "sell," contending the companies face continued headwinds amid the credit crisis.
Freddie Mac fell $1.14, or 4.1 percent, to $26.61, while Fannie Mae declined 27 cents to $28.72.