Bernanke, Countrywide boost stocks
RTGAM
Stock markets rose Thursday as investors speculated the U.S. may cut interest rates and a report suggested Bank of America Corp. is close to buying struggling Countrywide Financial Corp.
Shares of Countrywide, the largest U.S. mortgage lender, surged 51 per cent after several media reports said Bank of America was in advanced talks to buy it. Countrywide has been hit hard by the U.S. housing slump, with foreclosures and late payments on home loans rising to records in December.
U.S. Federal Reserve boss Ben Bernanke also played a hand in the market optimism after he promised to keep slashing interest rates to keep the U.S. economy from being shoved into recession by housing and credit woes.
"In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary," Mr. Bernanke said. "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks."
Economists welcomed the Fed Chairman's words, especially given mounting concerns that the U.S. economy is headed for - or already is in the grips of - a recession.
"Bernanke gave about as clear a signal as possible in his speech on Thursday ... no special Fed decoder ring needed there," said Sherry Cooper, chief economist at BMO Nesbitt Burns Inc.
The S&P/TSX composite index climbed 62.69 points to 13,642.63, with the mining and gold sectors adding ground as bullion prices surged.
Canada's big banks were among the day's biggest risers, with Bank of Nova Scotia up 3.4 per cent, Canadian Imperial Bank of Commerce adding 3.4 per cent, Royal Bank of Canada up 2.2 per cent and Toronto-Dominion Bank up 1.8 per cent.
On Wall Street, the Dow industrials closed 117.78 points higher at 12,853.09. In the broader U.S. market, the Nasdaq climbed 13.97 points while the S&P 500 rose 11.20 points.
With files from wires.
Copyright 2001 The Globe and Mail