The Wall Street Journal-20080111-Top Lender Surges 51- On Rescue
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Top Lender Surges 51% On Rescue
The contrarians won big yesterday as recent pariahs such as Countrywide Financial, airlines and General Motors drove a late rally in blue-chip indexes and the merger market reignited.
But declines for Capital One Financial and American Express highlighted the persistence of credit and consumer worries.
Countrywide Financial surged $2.63, or 51%, to $7.75, its biggest percentage gain since listing on the New York Stock Exchange in 1985, on news that Bank of America is in talks to acquire it. It was a jarring change of fortunes. Wednesday, the Calabasas, Calif., company's shares closed at their lowest since May 1996 amid concerns about delinquent loans; Tuesday, the company denied rumors it was filing for bankruptcy protection.
Shares of Bank of America, which is showing a hefty loss on a $2 billion investment in Countrywide made in August, rose 56 cents, or 1.5%, to 39.30. Buyers clamored for many financial stocks in the wake of the news: Financial Select Sector SPDR Fund, an exchange-traded fund that acts as a basket of banks and lenders, rose 46 cents, or 1.7%, to 27.41 after trading as low as 26.43 during the session.
Among Dow components, Citigroup rose 62 cents, or 2.3%, to 28.11. Citi and Merrill Lynch are seeking more investments from foreign governments. J.P. Morgan Chase was a leading gainer in the Dow, adding 1.07, or 2.7%, to 41.33.
There were some notable exceptions, however. Capital One Financial fell 43 cents, or 1%, to 42.92 after the credit-card provider warned 2007 profit will fall short of prior expectations partly because of increased delinquencies, hinting the difficulty to pay bills that spelled trouble for mortgage lenders is spreading to other areas. American Express fell 16 cents to 48.92.
Blackstone Group rose 1.74, or 9.6%, to 19.84. Dow Jones Newswires reported the private-equity firm, whose shares are down significantly since its initial public offering last year amid a slowdown in leveraged buyouts, agreed to buy hedge fund operator GSO Capital Partners for as much as $930 million, bolstering its operations in trading distressed debt.
Deal talk also revived another beaten-down sector: airlines. Delta Air Lines could engage in a corporate "dating game," likely holding talks with both United Air Lines parent UAL and with Northwest Airlines to see which would make the better merger partner.
UAL rose 6.16, or 24%, to 32.19, its biggest gain since reemerging from bankruptcy protection in 2006. Northwest gained 3.84, or 32%, to 15.85, and Delta Air Lines added 2.46, or 18%, to 15.98.
Retailers were mixed after reporting divergent fortunes during the holiday shopping season.
Wal-Mart Stores rose 1.50, or 3.2%, to 48.40 after the world's largest retailer posted an increase in December same-store sales, or sales in stores open a year or more.
Wal-Mart was the second-strongest gainer on the Dow after General Motors, which added 90 cents, or 4%, to 23.68, making up for some of its losses so far in 2008.
Among other stores, Costco Wholesale (Nasdaq) added 2.59, or 3.9%, to 69.86 on the Nasdaq after the members-only warehouse-style retailer said December same-store sales rose sharply, helped by international operations.
Some clothiers were less fortunate. Macy's fell seven cents to 22.60 after the department store posted a precipitous fall in December same- store sales, saying "macroeconomic trends" made shoppers "cautious."
Nordstrom added 79 cents, or 2.5%, to 33.10, even after the high-end retailer posted a decline in December sales in comparable locations.
Among other Dow components, Boeing rose 2.06, or 2.6%, to 82.36. Brokerage Credit Suisse said worries about the economy and delays on the aerospace company's Dreamliner 787 program were overdone.
Verizon Communications rose 98 cents, or 2.3%, to 43.45 after the telecommunications concern said effects of economic and housing-market distress hadn't shown up in its business.
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Kaja Whitehouse contributed to this article.
