NEW YORK (Reuters) - Stocks ended mostly higher on Friday as big bank shares staged a late rally on hopes lawmakers would hammer out an agreement on a $700 billion financial-sector rescue plan this weekend.
But tech shares took it on the chin, keeping the Nasdaq in the red, after a disappointing outlook from BlackBerry maker Research in Motion. considered a bellwether for the sector.
Friday’s market gains were in sharp contrast to the rest of the week, which was the worst for the benchmark S&P 500 since May.
Trading volume was light, with most traders glued to the increasingly acrimonious debate in Washington over Treasury’s plan to mop up bad mortgage debt from bank balance sheets to get them lending again.
Shares of JPMorgan Chase, up 11 percent and Bank of America, up nearly 7 percent, ranked among the top gainers in both the Dow and the S&P 500. An S&P index of financial shares rose 3.2 percent.
“Wall Street is banking on a definitive agreement in place before markets open on Monday,” said Fred Dickson, director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon.
The Dow Jones industrial average was up 121.07 points, or 1.10 percent, at 11,143.13. The Standard & Poor’s 500 Index was up 4.09 points, or 0.34 percent, at 1,213.27. But the Nasdaq Composite Index was down 3.23 points, or 0.15 percent, at 2,183.34.
The fate of the rescue plan pushed nearly everything else to the background on Friday, including U.S. bank regulators’ move to close Washington Mutual late on Thursday, the largest U.S. bank failure in history.
“It’s amazing that WaMu is secondary today, but the bailout package is the pressing issue,” said Alan Lancz, president of Alan B. Lancz & Associates Inc, an advisory firm in Toledo, Ohio. “Something has to get done to put a floor under the downward spiral of mortgage assets.”
On Thursday, bank regulators closed Washington Mutual, which had $307 billion of assets and $188 billion of deposits, and brokered a sale of the thrift’s assets to JPMorgan Chase.
Shares of JPMorgan Chase shot up 11 percent to $48.24, while Bank of America added 6.8 percent to $36.70.
JPMorgan’s larger-than-expected $10 billion stock sale to cap its purchase of Washington Mutual also helped boost confidence in financial shares.
Wachovia shares tumbled 27 percent to $10 but had been trading even lower before the New York Times reported the bank had started early deal talks with Citigroup.
In contrast, Citi shares rose 3.8 percent to $20.15.
Technology companies struggled on Friday after Research In Motion warned that quarterly profit will fall short of Wall Street’s forecasts. RIM shares fell 27.5 percent, or $26.77, to $70.76. It was the top-weighted drag on the Nasdaq 100.
Apple Inc, maker of the iPhone and iPod, shed 2.8 percent, or $3.69, to $128.24. Apple’s decline also hurt the Nasdaq.
The government’s bailout plan has run into stiff resistance on Capitol Hill, mostly from Republican lawmakers who have proposed an alternative that provides for no government money up front.
It’s been a tough sell on Main Street, too, where voters see it as a taxpayer-funded bailout of wealthy Wall Street.
President George W. Bush said Congress would eventually agree on a plan, but investors said the market remained nervous about the outlook for corporate earnings and the health of the broader U.S. economy.
“The plan is crucial to keeping the economy afloat, but it isn’t going to turn around the housing crisis or pump new life into the economy,” Dickson said. “Those are issues we will have to deal with.”
Earlier, the Commerce Department said GDP, the measure of total goods and services output within U.S. borders, expanded at an annual rate of 2.8 percent in the April-June quarter, down from a rate of 3.3 percent it estimated a month ago.
Giri Cherukuri, head trader at OakBrook Investments in Linsdale, Illinois, said investors should be prepared for the market to turn lower once a rescue deal is finally reached as focus returns to the weak economy and profit outlook.
About 1.19 billion shares changed hands on the New York Stock Exchange, below last year’s estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.98 billion shares traded, also below last year’s daily average of 2.17 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2 to 1. On the Nasdaq, decliners outran advancers by a ratio of about 1.4 to 1.
Additional reporting by Kristina Cooke; editing by Jan Paschal