Stocks jump on reports of plan for bad bank assets...

Source: Mail.com

Financial stocks led Wall Street higher Wednesday on investor hopes the Obama administration will create banks to absorb the bad assets weighing down the financial system.

The Standard & Poor's 500 index, a benchmark for the overall stock market, rose for the fourth straight session.

Investors have been worrying that banks won't be able to resume more normal lending without somehow dumping or walling off the bad debt that is corroding their balance sheets. And the economy can't recover from a yearlong recession without improvements in lending and consumer confidence.

Bank shares jumped on the news: Wells Fargo & Co. gained 18 percent, Citigroup Inc. jumped 17 percent and Bank of America added 15 percent.

Investors are also more upbeat as the House nears a vote on an $825 billion stimulus plan that contains a mix of new spending and tax cuts. Wall Street is hopeful that and other measures will help free the economy from its worst recession in decades.

Wall Street's focus on Washington is divided between Capitol Hill and the Federal Reserve, which is all but certain to leave its federal funds rate at a record low Wednesday to try to help the economy by making it cheaper to borrow money.

It's unclear whether the central bank might take any new steps to help the economy, however. In December, the Fed took the unprecedented step of slashing its key rate from 1 percent to a range of zero to 0.25 percent. The Fed's statement announcing any actions, and its assessment of the economy, is due at 2:15 p.m. EST.

In the first hour of trading, the Dow Jones industrial average rose 97.17, or 1.19 percent, to 8,271.90.

Broader stock indicators also rose. The Standard & Poor's 500 index jumped 15.49, or 1.83 percent, to 861.20, and the Nasdaq composite index rose 28.18, or 1.87 percent, to 1,533.88.

Bill Dwyer, chief investment officer at MTB Investment Advisors in Baltimore, said any steps Washington can take to revive the economy could help the market. He said the plan to help neutralize bad bank assets could speed a recovery.

"We aren't really going to see any great economic news anytime soon so if there is any positive movement in Washington toward the problem that would stabilize the decline," he said.

Wells Fargo jumped $2.94, or 18 percent, to $19.13 after the company reported it booked big write-downs to reduce is exposure to the risky assets of Wachovia Corp. and added to its reserves for future losses. Wells Fargo acquired Wachovia on Dec. 31.

Other banks charged higher on the notion that Washington could vacuum up some of their bad debt. Citigroup Inc. rose 62 cents, or 17 percent, to $4.17, while Bank of America Corp. rose 95 cents, or 15 percent, to $7.45. State Street Corp. surged $5.07, or 26 percent, to $24.69.