(Updates to midday; changes byline)
By Kristina Cooke
NEW YORK, Dec 12 (Reuters) - U.S. stocks surged on
Wednesday after the Federal Reserve said it is coordinating
with other central banks to ease global credit market strains
through increased short-term lending.
But stocks were off their highs on the day as financial
shares steadily lost their bid following a surge in the opening
minutes of the session.
The central banks' move came a day after stocks tumbled on
disappointment over the Fed's modest quarter-percentage-point
cut in interest rates.
Many on Wall Street had hoped for a half-percentage-point
rate cut to help stave off a recession and loosen lending
conditions.
But on Wednesday, the Fed said it would launch a "temporary
term auction facility" that banks can use to secure loans at
its discount window. For details, see [ID:nWBT008042]
"If this works, it would be a genius way for them to unlock
the liquidity debacle that we have," said Sam Rahman, portfolio
manager at Baring Asset Management Inc. in Boston.
"It's not so much an economic issue, it's much more of a
credit market issue, and the Fed is trying to target that."
The Dow Jones industrial average <.DJI> was up 85.76
points, or 0.64 percent, at 13,518.53. The Standard & Poor's
500 Index <.SPX> was up 13.77 points, or 0.93 percent, at
1,491.42. The Nasdaq Composite Index <.IXIC> was up 32.65
points, or 1.23 percent, at 2,685.00.
Home builders, mortgage companies and other companies
dependent on the credit market rebounded after Tuesday's
bludgeoning.
Centex Corp <CTX.N>, the No. 4 U.S. home builder, was up
4.3 percent at $23.98. Investment bank Morgan Stanley <MS.N>
rose 1.3 percent to $50.59. AT&T <T.N>, the largest U.S. telephone company, extended
its gains for a second day after announcing its biggest-ever
dividend increase and a share buyback program. Adding to the
rally, Lehman Brothers lifted its price target on the shares.
AT&T shares were up 6.2 percent to $41.89.
Energy shares were also helping to lift the market as crude
oil rose more than 2 percent to $91.94 a barrel after weekly
supply data showed crude inventories fell to their lowest level
since March 2005.
Shares of oil field services company Schlumberger <SLB.N>
were up 2.7 percent to $98.31. Oil producer ConocoPhillips
<COP.N> gained 2.3 percent to $83.51.
The Fed's measures, however, failed to give a sustained
boost to financial shares, with the S&P financials <.GSPF> off
0.3 percent.
Bank of America's <BAC.N> shares fell 2.5 percent, after
the company's chief executive, Ken Lewis, said the bank expects
fourth-quarter results to be disappointing, citing expected
writedowns and lower trading revenue. Bank of America shares
fell 2.9 percent to $43.35 on the NYSE.
Another laggard among financials was SLM Corp, also known
as Sallie Mae <SLM.N>, which cut its earnings forecast for
2008. The student lender also said a group of investors led by
J.C. Flowers has formally dropped its offer to buy the
company.
Sallie Mae shares slid 7.2 percent to $29.64 on the NYSE.
Shares of Wachovia <WB.N> were down 3.3 percent at $40.54
after the bank said it sees a loan loss provision for the
fourth quarter of about $1 billion, nearly double a previous
estimate.
The Fed's announcement was made in concert with the
unveiling of other actions by the Bank of Canada, the Bank of
England, the European Central Bank and the Swiss National Bank.
The Bank of Japan and Sweden's Riksbank also made statements.
(Editing by Gary Crosse)
(([email protected]; +1-646-223-6154; Reuters
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