US stocks set to extend Monday's huge rally

[October 14, 2008]  NEW YORK (AP) -- Wall Street was gearing up for another surge higher Tuesday following the Dow Jones industrial average's historic 936-point jump, with investors encouraged by the U.S. government's plans to spend $250 billion on private banks' stock.

President Bush is expected to announce Tuesday morning the details of the plan, which would use a chunk of the $700 billion bailout to recapitalize the nation's troubled banks.

Dow Jones industrial average futures rose 176, or 1.85 percent, to 9,684. Standard & Poor's 500 index futures rose 16.50, or 1.62 percent, to 1,033.20, and Nasdaq 100 index futures rose 16.75, or 1.15 percent, to 1,475.25.

Asian and European markets shot higher as well, after Wall Street on Monday propelled the Dow to its largest one-day rise ever.

Hong Kong's Hang Seng index rose 3.19 percent, after a more than 10 percent increase on Monday. Japan's Nikkei index, catching up from the country's market holiday Monday, jumped 14.15 percent -- the largest increase ever. The Bank of Japan said it will hold an unscheduled policy board meeting Tuesday at 8:30 p.m. local time, or 9:30 a.m. Eastern time, to study recent developments in global markets.

And in morning trading in Europe, Britain's FTSE 100 jumped 4.27 percent, Germany's DAX index rose 4.94 percent, and France's CAC-40 rose 5.17 percent.

Still, while the markets are enjoying a big rebound, analysts are warning that stock trading will likely see ongoing volatility as investors still grapple with the vast number of problems still facing the financial system and that have spilled into the global economy.

Following the Columbus Day holiday, the U.S. government bond markets are opening again Tuesday and indicating that investors' desire for safe assets is still strong, but letting up. The three-month Treasury bill's yield rose to 0.58 percent from 0.21 percent late Friday, and the 10-year note's yield rose to 3.99 percent from 3.86 percent.

Oil prices jumped along with stocks. Crude oil rose $3.48 to $84.67 in premarket electronic trading on the New York Mercantile Exchange.

The dollar fell against other major currencies.

The stock market has been rebounding from a gruesome week on Wall Street that obliterated about $2.4 trillion in shareholder wealth. The Dow came off an eight-day losing streak that amassed point losses of just under 2,400, or 22.1 percent, bringing the blue-chip index to its lowest level since April 2003. That 18.2 percent weekly plunge in the Dow was the worst in the index's 112-year history.

The recent sell-off in stocks arrived amid a seize-up in lending, as banks and investors around the world grew fearful about the creditworthiness of other institutions following the bankruptcy of investment bank Lehman Brothers Holdings Inc. and the failure of thrift bank Washington Mutual Inc. When lending is at a virtual standstill, the economy cannot grow.

With investors worried that regional U.S. banks might be the next to fall, the decision by Madrid-based Banco Santander late Monday to buy Philadelphia-based thrift Sovereign Bancorp Inc. came as another relief. The Spanish bank, which already owned a 25 percent stake in Sovereign, bought the rest of the bank at a premium for $1.9 billion.

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On the Net:

New York Stock Exchange: http://www.nyse.com/

Nasdaq Stock Market: http://www.nasdaq.com/

[Associated Press; By MADLEN READ]

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