US Stocks Surge on Bank Plan, Rise in Home Sales

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NEW YORK-Wall street received their anticipated good news on the economy’s biggest problems-banks and housing. Additional good news is the Dow Jones industrials increased up nearly 500 points.

Investors adamantly supported the governments plan to aid the banks removal of bad assets from their books and the effect was a rise in home sales. Major stock indicators surged approximately 7 percent, including the Dow, which received its biggest percentage increase since October 2008.

Analysts are cautious as to report whether Wall Street is recovering from the fall collapse due to the markets numerous false starts. The belief for many lies in the now increasing housing and banking news-which is why investors began to buy again.

Two weeks ago the market began to show positive signs of increase when Citigroup Inc. was operating at a profit in January and February.

Analysts reported more fundamental strength in Monday’s buying than what was viewed at the beginning of the rally. Dave Rovelli, managing director of trading at brokerage Canaccord Adams, said there may be less short covering, which occurs when traders are forced to purchase to cover misplaced bets that stocks would fall. Short covering is a factor to the market’s surge after the Citigroup news.

Stocks shot higher at the opening and continued to rise. The Treasury Department said the bad asset cleanup program would be sponsored partially by the governments $700 billion financial rescue fund and would also receive aid from the Federal Reserve, the Federal Deposit Insurance Corporation, and the participation of private investors.

The market had been waiting for a response from the government concerning details of their plan to aid in the banks removal of bad assets. Treasury Secretary Timothy Geithner announced an outline of the program last month, but few details were shared of exactly how it would be implemented and this led to a plunge that made the Dow shed 380 points.

Subodh Kumar, an independent investment strategist in Toronto agrees that the market is shedding some of its excess pessimism but understands that this does not mean the market is headed straight up.

Although the National Association of Realtors’ existing home sales report showed a decline in home prices in February, the overall report was overwhelmingly positive for investors. The biggest jump in nearly six years came as first-time buyers pounced on deep discounts of foreclosures and other distressed properties.

 

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