Dow Jumps 2%, Led by Financials
Stocks shot up Tuesday after a liquidity announcement from the Federal Reserve.
The Dow Jones Industrial Average jumped more than 250 points, or 2 percent, right at the opening bell. This ranks as the Dow's seventh biggest opening; the blue-chip index has opened more than 200 points higher only 10 times since it was created in 1896.
The Fed, in conjunction with other central banks, announced plans to expand its securities-lending program to $200 billion and, for the first time, include primary dealers such as investment banks. It's also adding non-agency private AAA mortgages to the program, instead of just agency-backed mortgages.
"This is big," Art Cashin, director of floor operations at UBS, told CNBC. "The [Fed] helicopter is up in the air ... and it's about to rain down money on lots of places." Cashin attributed the market's reaction to short covering.
Fed-funds futures backed away from expectations for a rate cut of three-quarters of a percentage point at the Fed's next meeting, March 18, favoring instead a cut of half a percentage point.
Financials led the way higher with sharp gains in banks including Citigroup , Lehman Brothers , Bear Stearns, Washington Mutual and Wachovia .
Shares of Thornburg Mortgage nearly doubled after the Fed announcement. Earlier, the "jumbo" lender, which provides loans for expensive homes, reported a $676.6 million writedown for adjustable-rate mortgages, 58 percent higher than it projected four days earlier.
Fannie Maeand Freddie Mac also rose sharply.
Meanwhile, the U.S. trade gap expandedin January amid soaring prices for imports such as crude oil. The trade deficit widened to $58.2 billion from $57.9 billion in December, the Commerce Department reported.
Crude oil set a record for a fifth straight day, topping $109 a barrel.
Asian markets bounced back, with both Japan and South Korea closing up more than 1 percent. European shares rose to session highs in afternoon trading after the U.S. Fed announcement.
Deputy Treasury Secretary Robert Kimmitt told CNBC Europe that the fundamentals of the world's biggest economy are sound, although it still faces "headwinds" because of the falling housing market, tightening credit markets and rising prices for commodities.
In reference to the weakening dollar, Kimmitt said, "We believe that currency rates should be set in open, competitive markets based on underlying fundamentals, and we think the long-term fundamentals of the U.S. economy are sound," Kimmitt told "Squawk Box Europe."
Boeing was the only Dow decliner after the defense giant said that it will formally protest a $35 billion Air Force contractawarded to European Aeronautic Defense and Space and Northrop Grumman. Shars of European rival EADS were sharply lower after it reported a wider than expected loss for last year.
WellPoint tumbled after the health insurer cut its full-year guidance and a slew of analysts downgraded the stock.
Rivals Aetna , Humana and Unitedhealth Group also skidded.
Amgen shares slipped amid concerns that the company's anemia drugs for cancer chemotherapy may lose FDA approval. A panel of outside experts is slated to convene on Thursday.
Chip maker Texas Instruments after the closing bell slashed its first-quarter earnings outlook, citing weaker-than-expected chip demand. TI, which makes chips for everything from cell phones to televisions, now expects earnings per share between 41 cents to 45 cents, down from its prior range of 43 cents to 49 cents.
Elsewhere in tech land, Google shares rose after the Internet giant received approval from European regulators for its $3.1 billion purchase of online-ad company DoubleClick.
General Electric advanced following news that Chairman Jeffrey Immelt plans to squelch rumors of a sale of NBC Universal, parent of CNBC, with a message in GE's annual report. There had been rampant speculation that GE might sell the media division after the Beijing Olympics in August.
"Should we sell NBCU? The answer is no!" Mr. Immelt wrote in to investors in the annual report, set to be released Wednesday. "I just don’t see it happening. Not before the Olympics, not after the Olympics. It doesn’t make sense."
Kroger, the largest U.S. grocery chain, reported early Tuesday that its earnings fell 16 percent due to a year-earlier tax benefit and other one-time items, though per-share earnings beat analysts' consensus forecast by a penny. Net income dropped to $322.9 million, or 48 cents a share, from $384.8 million, or 54 cents a share, a year earlier.
TUESDAY: Mississippi primary
WEDNESDAY: Weekly crude inventories; Treasury budget; Bill Gates on Capitol Hill
THURSDAY: Import prices; retail sales; weekly jobless claims; business inventories
FRIDAY: CPI, consumer sentiment
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