US stocks rise on hope for bail-out passage

October 4th, 2008 - 12:03 am ICT by IANS  

Lehman BrothersWashington, Oct 3 (DPA) US stocks rallied for the first time in three days as the US House of Representatives began debate Friday on a new version of the finance rescue plan that the White House says is desperately needed.Wachovia Corp rallied as much as 80 percent after Wells Fargo & Co, the biggest West Coast bank, agreed to buy the lender for about $15.1 billion.

The US jobless rate remained steady at a rate of 6.1 percent in September, unchanged from the month before, but 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 Friday.

The broad-based Standard & Poor’s 500 Index gained 26.97 points, or 2.42 percent, to 1,141.25 at 12 p.m. in New York. The Dow Jones index of blue chips added 188.92, or 1.80 percent, to 10,671.77. The Nasdaq high tech composite index rose 53.64, or 2.71 percent, to 2,030.36.

The credit crunch tightened even more Friday, 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 anticipates that credit will loosen up if Congress passes 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 defied Congressional leaders and the lame duck US President George W. Bush Monday by voting down the first version of the rescue plan.

The financial crisis, kicked off by Lehman Brothers’ bankruptcy on Sep 15, 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.

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