Wells Fargo & Co.s surprise $15 billion agreement to buy Wachovia helped U.S. stocks bounce higher early today as investors nervously awaited the House of Representatives expected vote on the governments $700 billion economic recovery plan.
While investors on Thursday focused on weak economic data, they largely discounted news today that employers cut payrolls by 159,000 in September, the most in five years. The Labor Departments monthly jobs report also showed that the unemployment rate held steady at 6.1% last month.
In morning trading, the Dow Jones industrial average was ahead 146.39 points, or 1.4%, at 10,629.24. The blue-chip barometer dropped nearly 350 points on Thursday. The S&P 500 index this morning added 22.20 points, or 2%, to 1,136.48 and the Nasdaq composite index gained 42.27 points, or 2.1%, to 2,018.99.
Shares of Wachovia jumped 76% to $6.90 today after news that the bank had agreed to merge with Wells Fargo & Co. The stock closed at $3.91 on Thursday. Wells Fargo, the largest U.S. bank on the West Coast, agreed to buy Wachovia for about $15 billion in stock. Earlier this week, Citigroup said it was buying just part of the besieged lender with assistance from the federal government.
Wachovia is led by former Treasury Department official Robert Steel.
The Wells Fargo deal, which values the bank at $7 a share, is a surprise conclusion to Wachovia's search for a buyer. Citigroup said on Monday it had reached an agreement in principal to acquire Wachovia's banking businesses for about $2.16 billion.
Shares of Citigroup fell 8%to $20.69 in pre-market trade after the Wachovia-Wells Fargo tie-up was announced.
In Washington, House members were gathering to consider a revised economic bailout package that the Senate passed on Wednesday
We feel fairly optimistic that we have a good chance for a successful vote, Tony Fratto, a White House spokesman, said in a briefing for reporters on Thursday.
The House had rejected the gist of the rescue package Monday by a 228-205 vote. The Senate add-ons including a series of popular tax breaks and a provision that would raise the Federal Deposit Insurance Corp. insurance limit for bank deposits to $250,000 from $100,000 are credited by lawmakers and the White House for breathing new life into the measures prospects in the House.
Mr. Fratto said President Bush had been working the phones since Wednesday, soliciting support for the Senate-approved measure, mostly from House Republicans. Some of those members who voted against the original bill indicated they would support the revised package, Mr. Fratto added.
The addition of the increase in FDIC insurance and inclusion of the tax extenders should prove to be the magic contributions, said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable, a Washington lobbying organization for major financial institutions.
Contact Greg Crawford at [email protected]