US stocks rise on bail-out passage

October 4th, 2008 - 7:32 am ICT by IANS  

Washington, Oct 4 (DPA) US stocks rallied for the first time in three days as the US House of Representatives approved a new version of the finance rescue plan that the White House says is desperately needed.Major US stock indices were up more than one percent shortly after the vote Friday.

The broad-based Standard & Poor’s 500 Index gained 18.33 points, or 1.65 percent, to 1,132.61 at 1738 GMT in New York, just minutes after legislators approved the plan.

The Dow Jones index of blue chips added 120.98, or 1.15 percent, to 10,603.83. The Nasdaq high tech composite index rose 34.00, or 1.72 percent, to 2,010.72.

The House voted by a resounding 263-171 in favour after rejecting an earlier version of the bill by 228-205 Monday.

The Senate approved the same package earlier this week and the bill now heads to the desk of President George W. Bush, who had urged the House to reconsider or face a long and painful recession.

“The legislation is a critical step toward stabilising our financial markets and ensuring an uninterrupted flow of credit to households and businesses,” Federal Reserve Chairman Ben Bernanke said after the vote.

“The Federal Reserve will continue to work closely with the Treasury as it undertakes these new initiatives. We will continue to use all of the powers at our disposal to mitigate credit market disruptions and to foster a strong, vibrant economy.”

The credit crunch had tightened even more Friday ahead of the vote, Bloomberg financial news service reported.

The London interbank offered rate, or Libor, that reflects the cost of borrowing in dollars for three months, rose for a fifth day, from 4.21 percent Thursday to 4.33 percent Friday, the highest rate since Jan 11.

The Libor rise signalled continuing uncertainty in the all-important interbank lending system that fuels the commercial system.

US Secretary of Treasury Henry Paulson anticipated that credit would loosen up if Congress passed the emergency $700 billion financial rescue plan, under which the government will buy up mortgage assets that have gone sour and drained the system of credit.

A coalition of resistant Republicans and Democrats had defied Congressional leaders and US President George W. Bush Monday by voting down the first version of the rescue plan.

The financial crisis has played volatile havoc with stock markets which have risen and fallen by larger than normal percentage points along with day-to-day developments in Washington.

In other financial news, the US jobless rate remained steady at a rate of 6.1 percent in September, unchanged from the month before.

However, non-farm payrolls have shed another 159,000 jobs and employment continued to fall in construction, manufacturing and retail trade, the US Department of Labour said earlier Friday.

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