Stocks rose Thursday on signs that congressional and White House officials may be nearing agreement on a phased-in financial bailout package.
Still, the details seemed very much up in the air, with reports changing throughout the day on whether an agreement had been reached, as congressional Republicans seemed to have the most problems with the plan.
But with credit markets seized up and banks and other companies shut off from the short-term borrowing they need to fund operations, the government seems to have little alternative but to assume its role as the nation’s financial backstop, which was formalized with the advent of the Federal Reserve in 1913. Indeed, some — including Fed Chairman Ben Bernanke — see the Fed’s failure to use that power in the aftermath of the 1929 crash as one of the primary causes of the Great Depression; another oft-cited cause was protectionism in the form of the Smoot-Hawley Tariff Act.
It remains to be seen whether the government’s massive intervention will work — or what unintended consequences it might have. But given the potential consequences of inaction — and evidence that the credit problem appears to be worsening just this week — consensus seems to be growing on Capitol Hill that something needs to be done quickly.
In the longer term, much will need to be done to rein in the excesses that fueled the crisis, from unregulated derivatives and hedge funds to lax credit and leverage standards to the SEC’s elimination of shorting restrictions that occurred just before the crisis hit.
But for now, an imperfect plan that gets credit markets moving again would be no small victory for the White House and Capitol Hill — and everyone from Wall Street to Main Street.
Oracle (NASDAQ: ORCL) led the tech sector higher, rising 2.6% on the company’s first hardware products.
Microsoft (NASDAQ: MSFT), Cisco (NASDAQ: CSCO) and Apple (NASDAQ: AAPL) were among other tech leaders gaining 2.5% more.
Transmeta (NASDAQ: TMTA) gained 19% on news that the company is up for sale.
Red Hat (NYSE: RHT) fell 8% after lowering its outlook.
After the close, Research In Motion (NASDAQ: RIMM) tumbled 18% on results and guidance that were just below expectations.
The Nasdaq rose 30 to 2186, the S&P climed 23 to 1209, and the Dow rose 196 to 11,022. Volume rose to 5.94 billion shares on the NYSE, and 1.89 billion on the Nasdaq. Advancers led by a 24-9 margin on the NYSE, and 17-11 on the Nasdaq. Upside volume was 62% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 8-138 on the NYSE, and 15-139 on the Nasdaq.
