Wall St indexes rise led by energy stocks
NEW YORK (Reuters) - Stocks rose on Wednesday as a strong outlook from Dow component 3M Co and a rally in energy stocks outweighed concern that a Federal Reserve-led plan to dissolve the credit crunch was not a panacea for the stricken financial sector.
The surprise move from the Fed and other central banks was initially greeted with enthusiasm on Wall Street, powering big gains early in the session, but that optimism later evaporated.
Investors' first take was that frozen money markets would soon begin to thaw, providing much-needed capital to banks and others struck by the crisis in the U.S. housing market.
But the plan failed to spark a rally in financial stocks, due to persistent anxiety about growing mortgage-related losses.
"The market originally reacted positively because they were concerned the Fed yesterday didn't provide enough liquidity, but then you got a series of bad news from the banks so the financials rolled over," said Jim Awad, chairman of W.P. Stewart & Co. Ltd. in New York.
"The statement from 3M shows multinational growth companies can still do well, and that could go on while financial companies go through a recession," he added.
Shares of 3M (MMM.N), a maker of products such as Scotch tape, jumped after it said it expects double-digit sales and earnings growth in 2008. 3M rose 2.4 percent to $86.66.
Energy companies, such as Exxon Mobil (XOM.N) also jumped as oil prices surged. Exxon rose 1.8 percent to $91.92.
The Dow Jones industrial average .DJI was up 41.13 points, or 0.31 percent, at 13,473.90. The Standard & Poor's 500 Index .SPX was up 8.94 points, or 0.61 percent, at 1,486.59. The Nasdaq Composite Index .IXIC was up 18.79 points, or 0.71 percent, at 2,671.14.
The global effort to ease strains in credit markets came a day after the Fed deflated hopes on Wall Street by trimming rates rather than aggressively lowering them.
Home builders, bludgeoned the day earlier, rebounded on the central banks' action. Centex Corp (CTX.N), the No. 4 U.S. home builder, was up 4.05 percent at $23.91.
AT&T (T.N), the largest U.S. telephone company, extended its gains for a second day after announcing its biggest-ever dividend increase and a share buyback program. Adding to the rally, Lehman Brothers lifted its price target on the shares.
AT&T shares jumped 5.7 percent to end at $41.71.
Financials were the main drag on the market. Citigroup sank 5.5 percent after Morgan Stanley said Citi's new chief executive was likely to cut the bank's dividend. Morgan also put Citi atop its list of stocks to bet against in 2008.
"I don't think this problem is over until the banks bite the bullet and put these assets on their balance sheet," Craig Hester, chief executive of Hester Capital Management in Austin, Texas.
"Reality is beginning to set in that certain banks like Citi that they are going to be capital constrained for a while," he said.
Bank of America (BAC.N) shares fell 2.7 percent to $43.43 after the company's chief executive, Ken Lewis, said the bank expects fourth-quarter results to be disappointing because of writedowns and lower trading revenue.
Shares of Wachovia Corp WB.N were down 3.4 percent at $40.53 after the bank said it sees a loan loss provision for the fourth quarter of about $1 billion, nearly double a previous estimate.
Citigroup dropped 5.5 percent to $31.47.
Another laggard among financials was student lender SLM Corp SLM.N, which cut its earnings forecast for 2008. Shares of the company, also known as Sallie Mae, slid 10.8 percent to $28.49 on the NYSE.
Trading was moderate on the NYSE, with about 1.73 billion shares changing hands, just short of last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.30 billion shares traded, ahead of last year's daily average of 2.02 billion.
Rising stocks were outnumbering falling ones by a ratio of about 18 to 14 on the NYSE and by 15 to 14 on Nasdaq.
(Reporting by Kristina Cooke; editing by Gary Crosse)
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