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FINANCIAL STOCKS LIFT MARKET BUT CAUTION ABOUNDS

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Financial Stocks Give Wall Street A Boost


Investors Respond After Treasury Secretary Says The “Vast Majority” Of Banks Had More Capital Than Needed


















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Trader Christopher Dalton, Sr., center left, works on the floor of the New York Stock Exchange Tuesday, April 21, 2009.  (AP Photo/Richard Drew)



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Toxic Assets Wreck Wall St.


Many banks are expected to fail the “stress test,” leading the market into a tumble, reports Priya David. Julie Chen talks to financial manager Art Cashin. | Share/Embed







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(CBS/ AP)  A reversal in bank stocks pulled the market higher Tuesday after Treasury Secretary Timothy Geithner told Congress that some banks could be allowed to repay financial bailout funds.

Geithner said the decision on repayments would be left to bank regulators and that “the vast majority” of banks had more capital than they needed.

Stocks had fluctuated earlier Tuesday after a string of lackluster earnings reports and forecasts stoked worries about how quickly the economy can recover.

Banks stocks, which had slid on Monday, bounced back after the Geithner comments. JPMorgan Chase & Co. rose $1.69, or 5.7 percent, to $31.38, while Citigroup Inc. rose 22 cents, or 7.5 percent, to $3.16. Goldman Sachs Group Inc. rose $4.14, or 3.6 percent, to $119.15. Morgan Stanley rose $1.28, or 5.4 percent, to $24.80 ahead of its quarterly results on Wednesday.

In afternoon trading, the Dow Jones industrial average rose 133.17, or 1.7 percent, to 7,974.90.

Broader stock indicators showed the biggest gains. The Standard & Poor’s 500 index rose 17.70, or 2.13 percent, to 850.09, and the Nasdaq composite index rose 32.89, or 2.05 percent, to 1,641.29.

The KBW Bank Index, which tracks 24 of the nation’s largest banks, rose 6 percent after falling in morning trading.

Geithner said the government’s bank rescue plan “strikes the right balance” by letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.

Geithner wrote in a letter to Elizabeth Warren, head of the Congressional Oversight Panel, that $109.6 billion in resources remain in the government’s $700 billion financial rescue fund. Officials expect the fund will be boosted over the next year by about $25 billion as some institutions pay back money they have received.

Even with the bounce Tuesday investors’ worries about banks aren’t likely to ease soon, some analysts say.

“Nothing has been remedied in the banking sector,” said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. “A lot of these banks, they’re basically making money only because they’re getting money from the government for free.”

The market’s fluctuations and bargain-hunting weren’t surprising for traders after heavy selling Monday and a flurry of corporate comments about the economy. Stocks tumbled more than 3 percent Monday after Bank of America Corp.’s earnings report touched off renewed fears about rising levels of bad debt.

Analysts said some pullback had been in order after stocks surged more than 20 percent from 12-year lows in March.



Nothing has been remedied in the banking sector. A lot of these banks, they’re basically making money only because they’re getting money from the government for free.


Dave Rovelli,
Canaccord Adams
Bank of New York Mellon Corp., Caterpillar Inc., Coca-Cola Co. and drugmaker Merck & Co. posted results or issued forecasts that fell short of what the market expected. Wall Street is uneasy about some of the reports because analysts had set low expectations after a bruising January in which fourth-quarter results short-circuited a stock rally.

Not all financial stocks moved higher. Bank of New York Mellon’s first-quarter earnings fell a steeper-than-expected 57 percent. The company said it was slashing its dividend with the goal of repaying what it received from the government’s bank rescue. The stock fell $2.03, or 7.2 percent, to $26.

Construction equipment maker Caterpillar posted better-than-expected earnings but reduced its forecast. The stock had been lower in morning trading but edged higher with the broader market. Caterpillar rose 67 cents, or 2.2 percent, to $31.15.

Coca-Cola fell $1.25, or 2.8 percent, to $43.08, after its first-quarter earnings fell 10 percent because of restructuring charges and write-downs. The beverage maker’s earnings were in line with Wall Street’s expectations but sales fell short.

Merck reported a 57 percent drop in first-quarter earnings because of a slide in both sales of its drugs and income from its partnership on cholesterol medicines. Merck fell $1.38, or 5.5 percent, to $23.84.

DuPont said its first-quarter profit dropped on falling demand. The chemical company also cut its full-year forecast and said it will increase its efforts to cut fixed costs. DuPont rose $1.05, or 3.9 percent, to $27.79.

In other market moves, the Russell 2000 index of smaller companies rose 13.52, or 3 percent, to 466.01.

About three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 794.9 million shares.

Bond prices fell. That pushed up the yield on the benchmark 10-year Treasury note to 2.89 percent from 2.84 percent late Monday. The yield on the three-month T-bill rose to 0.15 percent from 0.12 percent Monday.

Light, sweet crude rose 22 cents to $46.10 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies while gold prices fell.

Overseas, Japan’s Nikkei stock average fell 2.4 percent. Britain’s FTSE 100 slipped 0.1 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 rose 0.2 percent.
















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