Wall Street Jumps After Gov't Debt Auction

By TIM PARADIS
|  Thursday, May 28, 2009  |  Updated 3:23 PM CDT
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Blame Them For Your Empty Wallet

AP

According to preliminary calculations, the Dow rose 103.78, or 1.3 percent, to 8,403.80. The S&P 500 index rose 13.77, or 1.5 percent, to 906.83, and the Nasdaq composite index advanced 20.71, or 1.2 percent, to 1,751.79.

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NEW YORK – Investors are finding fresh reasons to bet on an economic rebound.

Stocks jumped Thursday as gains in commodities like oil and natural gas signaled that traders expect a strengthening economy will demand more energy.

According to preliminary calculations, the Dow rose 103.78, or 1.3 percent, to 8,403.80. The S&P 500 index rose 13.77, or 1.5 percent, to 906.83, and the Nasdaq composite index advanced 20.71, or 1.2 percent, to 1,751.79.

The day's gains returned the S&P 500 index to the black for the year after it slid Wednesday.

Robust demand at an auction for Treasury debt also eased fears that the government would have to pay higher interest rates to entice buyers. Higher rates on long-term bonds would also drive up borrowing costs for consumers buying cars and homes, which in turn could endanger an economic recovery.

Major stock indicators rose more than 1 percent, including the Dow Jones industrial average, which gained almost 104 points.

It was the second straight day that interest rate movements called the shots in the stock market, and not likely the last. Analysts expect Wall Street will have to continue to grapple with worries that the government could eventually exhaust buyers' appetite for debt with an unprecedented level of bond sales. Washington needs to raise the money to pay for its bank rescue plan and economic stimulus spending.

A jittery first half to the day's trading follows a drop a big drop a day earlier triggered by a spike in long-term interest rates as the yield on the 10-year bond jumped to its highest rate in six months.

Traders say the fractiousness could continue as investors look for data to prove that their bets this spring on an economic recovery were correct. The Standard & Poor's 500 index, considered the most reliable measure of the broader market, is still up 34 percent from a 12-year low in early March.

"The market is absolutely being held hostage to the data," said David Joy, chief market strategist at Ameriprise Financial Inc.'s RiverSource Investments.

Joy pointed to the market's immediate reaction after the Treasury auction Thursday of $26 billion in 7-year notes, part of the $101 billion in debt the government offered this week. "There was a real sigh of relief," he said.

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