Stocks shot up after a report that lawmakers are very close to reaching an agreement on a Wall Street bailout.
House and Senate negotiators have reached a "fundamental agreement," said Sen. Chris Dodd, chairman of the Senate Banking Committee. After emerging from a morning-long meeting, Dodd told reporters that he thinks Congress will pass a bill within the next few days. Though, just a short while later, it emerged that House Republicans had not yet signed off on the deal.
The market numbers may have conveyed elation as a deal drew near but the mood on the trading floor was anything but. Traders had a serious case of buy the rumor, sell the news.
"I don't want them to ever let out the details!" Steve Grasso of Stuart Frankel told CNBC. "We can keep this rally probably into next week, but then you're going to see the details flood out and we're going to sell off of that."
General Electric moved from the bottom spot in the Dow to one of the top 10 gainers after an interview on CNBC with CEO Jeff Immelt in which he said the overall company remains strong. Immelt said the company's financial unit doesn't have activity in some of the high-risk areas that AIG and some investment banks did, that it's reducing its leverage and has been increasing its loss reserves for quite some time.
Earlier, GE was the biggest drag on the Dow after the economic bellwether cut its earnings outlook for the third-quarter and full year and halted its buyback plans because of turmoil in the financial-services markets. (Track the Dow winners losers.)
Jobless claims jumped by 32,000last week, more than the 20K jump expected. Orders for durable goods, items such as cars and refrigerators that are meant to last three years or more, fell by 4.5 percent, nearly three times the 1.6-percent drop expected. A lot of that was due to a drop in demand in the volatile transportation sector, which fell 3 percent, when economists had expected a 0.5-percent drop.
More dismal statistics for the housing sector: New-home sales plunged 11.5 percent to a 17-year low as prices hit a four-year low.
But the market shrugged off the triple miss on the economic front, instead pinning its hopes on Congress.
The bailout bill is "almost a done deal," U.S. Representative Paul Kanjorski told CNBC on Thursday.
"I'm more optimistic this morning than I've ever been," Kanjorski, a Democrat from Pennsylvania who serves on the House Financial Service Committee and is chairman of a subcommittee on capital markets, said.
Meanwhile, President George W. Bush called an emergency meeting to discuss the bailout plan.
Financials were the top three gainers on the Dow: JPMorgan , Bank of America and American Express .
UBS shares surged about 5 percent on chatter that HSBC is prepared to make a bid on the Swiss bank, even though sources have told Reuters otherwise.
Amid all the uncertainty, the old saying "cash is king" has become fashionable again as experts warned in times like these investors should take refuge in safety.
Stocks had meandered on Wednesday as uncertainty about the deal and whether it would be approved this week or held up by political wrangling. Meanwhile, interbank lending remained extremely strained as banks sought to hold onto cash reserves.
Shares of Research In Motion advanced ahead of the BlackBerry maker's second-quarter earnings, due out after the closing bell. Analysts expect a 74-percent jump in earnings and an 89-percent increase in revenue.
Shares of Pilgrim's Pride tumbled more than 30 percent after the chicken producer warned it will post a serious quarterly loss and may default on its principal credit line. The company wasn't specific about the loss, which it attributed to high feed costs, weak demand for chicken breast meat and a bad hedge on grain. The company's lenders have agreed to temporarily waive the covenant in question through Oct. 28.
"This could add a level of risk with which, in today's uncertain world, we are not entirely comfortable," Goldman analysts wrote about Pilgrim's Pride in a note to clients. "So, we are guarded in our outlook."
Shares of rivals Tyson Foods and Sanderson Farms rose as Goldman analysts said neither are at risk for default.
On the earnings front, credit-card giant Discover Financial reported that its profit fell 11 percent as its provisions for bad loans rose sharply.
Drugstore-chain Rite Aid reported its loss nearly tripled as the Eckerd chain it bought in 2007 continued to struggle. Rite Aid also announced that it has hired two former Pathmark executives and three top Rite Aid execs are leaving the company.
The Chicago Federal Reserve and European Central Bank conference on credit market turmoil will be ongoing throughout the day, with Charles Evans, Kevin Warsh, Charles Plosser all set to make appearances. And Dallas Fed President Richard Fisher will speak on market turbulence at 7:30 pm.
STILL TO COME:
THURSDAY: Parade of Fed speakers; Earnings from Research In Motion after the bell
FRIDAY: St. Louis Fed pres. speaks; Last look at Q2 GDP, corporate profits; consumer sentiment; Earnings from KBHome
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