U.S. stocks surged today as Treasury Secretary Henry Paulson unveiled a government plan worth “hundreds of billions of dollars” to salvage the housing and financial markets.
The Dow Jones industrial average closed up 368.75, or 3.35%, at 11,388.44; the S&P 500 rose 48.56, or 4.02%, closing at 1,255.07; and the Nasdaq composite was up 74.80, or 3.4%, to close at 2,273.90. All numbers are preliminary.
Despite a week of extraordinary volatility, the Dow ended slightly below its closing of 11,421.99 points on Sept. 12, one week ago. Two weeks ago, on Sept 5, the Dow closed at 11,220.96.
“We did have such a big difference between daily volatility, which was incredibly high, and the weekly volatility that was not that high,” said Bud Haslett, a director at brokerage firm Miller Tabak + Co. “Volatility for the October contract was lower, too, which means participants expected the market to calm down.”
Mr. Paulson’s plan, which requires congressional approval, would involve guaranteeing money-market funds for one year and allowing just-rescued Fannie Mae and Freddie Mac to buy more distressed mortgage-backed securities.
The market was led by financial issues, which recovered in a short-covering rally as the SEC temporarily banned selling those stocks short. Morgan Stanley gained about 15% after confirming it was pursuing merger talks with Wachovia Corp. and other potential buyers.
The SEC, under heavy criticism from the industry for not having pondered the broader implications of its ban on “naked” short-selling, today said in a statement that its staff had recommended reinstating the exemption for options market makers.
