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Investors hopeful about financial, housing sectors after mortgage bailout
Published on Tuesday, Sep 09, 2008
Associated Press
NEW YORK: Stocks rallied Monday as investors placed bets that a recovery in the financial and housing sectors is more likely to occur after the government's move to bail out mortgage giants Fannie Mae and Freddie Mac.
The Dow Jones industrial average rose 289.78, or 2.58 percent, to 11,510.74 after being up nearly 350 points.
The announcement Sunday that the Treasury Department was seizing control of the companies, which own or back about half the nation's mortgage debt, brushed aside investors' long-simmering worries that the pair would be felled by a spike in bad mortgage debt.
Investors were hoping that the plan to inject up to $100 billion in each of the government-chartered mortgage financiers could not only help lower mortgage rates but also perhaps help buoy the overall economy. The move could help banks write new mortgages and refinance existing mortgages at lower rates, offering a possible lifeline to consumers struggling with increasing payments.
The move appeared to have an immediate soothing effect on mortgage rates. The national average interest rate for a 30-year fixed rate mortgage dropped 0.3 percentage point to 6.04 on Monday, according to financial publisher HSH Associates.
But the government's action isn't likely to alleviate troubles for homeowners who have fallen far behind on their mortgages.
Bond prices pulled back Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71 percent from 3.69 percent late Friday.
Get the full article here.
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