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Stocks End Volatile Week With Big Rally

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[March 21, 2008]  NEW YORK (AP) -- Wall Street capped a week of remarkable volatility with a big advance Thursday that left stocks higher for the week but didn't silence all of investors' concerns about the economy and the financial system.

Bargain-hunting and a milder-than-expected drop in a regional manufacturing report helped leaven stocks Thursday. The Dow Jones industrial average rose about 260 points on the day, giving the blue chips a gain of more than 3 percent for the week. Broader indexes finished the week with gains of 2 percent to 3 percent. The markets are closed for Good Friday.

A week that opened with fearful questions over the soundness of the financial system following the near collapse of Bear Stearns Cos. ended on a more upbeat note, thanks in part to the Federal Reserve's efforts to inject both liquidity and calm into the markets.

The central bank not only again deployed its primary tool for stimulating economic activity -- an interest rate cut -- but also took several steps this week aimed at oiling the troubled credit markets, making it easier for banks to breathe. Policymakers said they would loan directly to investment banks and accept as collateral much of the now-shunned debt that is backed by mortgages. A spike in defaults on home loans has made many financial players hesitant to extend credit.

But while many investors praised the Fed's unusual steps -- including the deal it brokered for JPMorgan Chase & Co. to buy a liquidity-starved Bear Stearns for a fraction of its value only a week ago -- many on Wall Street still hung onto some misgivings about the banking system and the economy.

Economic readings Thursday exemplified the mixed signals investors are receiving. The Labor Department said the number of newly laid off workers filing for unemployment benefits rose last week by a more-than-anticipated 22,000 to 378,000. That level is the highest in nearly two months. Meanwhile, the Conference Board said its index of leading economic indicators fell, as expected, for the fifth straight month in February.

But Wall Street found reason to buy back into stocks after a sell-off Wednesday when the Philadelphia Fed said manufacturing activity is dropping in March by less than it did in February, and by less than many economists anticipated.

And another day of sharp declines in commodities prices gave investors some hope that lower energy and food prices might boost consumers' discretionary spending and ease inflation concerns. Crude oil fell, while gold prices declined sharply.

Still, the markets are apt to stay volatile for some time, as investors digest news on the economy and the troubled financial sector.

"It's the every-other-day theory -- up one day, and down the next," said Scott Brown, chief economist at Raymond James & Associates.

The Dow on Thursday rose 261.66, or 2.16 percent, to 12,361.32, and gained 3.43 percent for the week.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 31.09, or 2.39 percent, to 1,329.51, and the Nasdaq composite index rose 48.15, or 2.18 percent, to 2,258.11.

For the week, the S&P rose 3.21 percent, while the Nasdaq gained 2.06 percent.

Though the week was a shortened one for Wall Street, the volatility packed into four days made it feel much longer. Thursday's gains came a day after a steep drop that eroded most of a 420-point gain in the Dow on Tuesday -- the biggest in more than five years -- following the Fed's decision to lower its benchmark interest rate by 0.75 percentage point to 2.25 percent.

Bond prices rose Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.34 percent from 3.41 percent late Wednesday.

The dollar rose against some other major currencies such as the euro.

Light, sweet crude fell 70 cents to settle at $101.84 on the New York Mercantile Exchange.

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Gold declined, hitting a one-month low as the stronger dollar helped quell some inflation concerns and led investors to exit some hard assets. Gold fell $25.30 to settle at $920 an ounce on the Nymex. Gold prices had their biggest one-day loss in nearly two years on Wednesday after setting a fresh record high on Monday.

Shares in energy and metals companies were mixed Thursday. ConocoPhillips rose $1.22 to $74.83; Barrick Gold Corp. fell $3.25, or 7.2 percent, to $42; and Newmont Mining Corp. fell $2.75, or 5.6 percent, to $45.97.

Todd Salamone, director of trading for Schaeffer's Investment Research in Cincinnati, said investors appeared somewhat optimistic.

"There's some belief out there that the worst is behind us, but that's not necessarily written in stone," he said. "You're getting a strong bid in financials and housing stocks -- sectors that have been the cause for the jitters."

Still, investors faced fresh concerns about tightness in the credit markets. CIT Group Inc. fell $3.72, or 32 percent, to $7.92 after the financial-services company said it has depleted its credit lines and plans to sell billions of dollars in loans because it is having trouble raising money in tight credit markets.

Punk, Ziegel & Co. analyst Richard Bove sounded an upbeat note about the financial sector in general, however. He wrote in a research note Thursday that while more unwelcome news will come, the financial sector's worst troubles are over and that investors shouldn't miss a "once-in-a-generation opportunity" to buy banking stocks.

Among financials, Morgan Stanley rose $6.22, or 14 percent, to $49.67, while Citigroup Inc. rose $2.09, or 10 percent, to $22.50.

The Russell 2000 index of smaller companies rose 17.29, or 2.60 percent, to 681.42.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 6.12 billion shares compared with 5.3 billion shares traded Wednesday.

Stock markets overseas were mostly lower. Hong Kong's Hang Seng Index fell 3.5 percent, but the Shanghai Composite Index closed 1.1 percent higher after an early plunge. Britain's FTSE 100 closed down 0.91 percent, Germany's DAX index lost 0.65 percent, and France's CAC-40 0.49 percent.

Japan's markets were closed for a national holiday.


The Dow Jones industrial average ended the week up 410.23, or 3.43 percent, at 12,361.32. The Standard & Poor's 500 index finished up 41.37, or 3.21 percent, at 1,329.51. The Nasdaq composite index ended the week up 45.62, or 2.06 percent, at 2,258.11.

The Russell 2000 index finished the week up 18.52, or 2.79 percent, at 681.42.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Thursday at 13,336.57, up 343.64 points, or 2.64 percent, for the week. A year ago, the index was at 14,302.24.


On the Net:

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

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

[Associated Press; By TIM PARADIS]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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