U.S. stocks surged today on confidence that Congress will agree to sign off on Treasury Secretary Henry Paulsons proposed $700 billion bailout of the financial system.
Reports that negotiators had reached an agreement in principle on a bailout package allowed investors to ignore the sting of bad economic news earlier today.
The Dow Jones industrial average closed up 196.89, or 1,82%, at 11,022.06; the S&P 500 rose 23.31, or 1.97%, closing at 1,209.18; and the Nasdaq composite was up 30.89, or 1.43%, to close at 2,186.57. All numbers are preliminary.
Congressional leaders signaled that lawmakers could approve the Bush administration request within 48 hours.
Although there is no way to predict whether the massive capital injection will entice banks to resume lending, prospects of a bailout for the financial industry pushed that sector higher while the market ignored a slew of sobering economic news.
Earlier today, General Electric Co., Fairfield, Conn., issued a profit warning; weekly claims for unemployment benefits rocketed to 493,000, a level historically associated with a recession; durable goods orders declined by a steep 4.5% in August; and new home sales were reported down 11.5% in August to their lowest level since August 1991.
The data, all of which came out below expectations, raised expectations that the Federal Reserve may lower the 2% federal funds rate target before year end.