Stocks jump on bailout hopes
Wall Street breathes a sigh of relief as historic bailout plan appears to be progressing.
NEW YORK (CNNMoney.com) -- Stocks gained Thursday morning, as optimism that a deal on the $700 billion bank bailout plan is near tempered the latest weak reports on the economy - including GE's profit warnings and a seven-year high for weekly jobless claims.
On Wednesday, markets ended mixed amid ongoing jitters over the government's $700 billion bailout proposal. The Dow and S&P 500 both slipped by about 0.2% and the Nasdaq gained 0.1%.
Late Wednesday, President Bush addressed the nation, delivering a grave speech about the "serious financial crisis," while noting that "our entire economy is in danger.
The prime-time address capped off a day in which Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson appeared before Congressional panels attempting to negotiate terms of the proposed bailout.
As of Thursday morning, lawmakers and officials seemed to be closer to a deal, and that reassured stock investors in the early going.
Jobless claims: The Labor Department reported that jobless claims surged to 493,000 in the week ended Sept. 20, sharply higher than the 445,000 projected by economists surveyed by Briefing.com.
That marks the highest figure since the week ended Sept. 29, 2001, immediately after the terrorist attacks on the World Trade Center and the Pentagon. The government said that 50,000 of the jobless claims were the result of Hurricanes Ike and Gustav. Discounting those claims, the figure was actually slightly better than forecast.
Claims have remained above the 400,000 mark for more than two months in a sign of the ongoing strain in the labor market. The report is the first key economic indicator since the credit crisis reached a fevered pitch.
Companies: General Electric (GE, Fortune 500), the Connecticut-based conglomerate, lowered its earnings forecast, blaming turmoil in the financial markets. The company lowered its third-quarter profit estimate to a range of 43 cents to 48 cents per share, from the prior estimate of 50 cents to 54 cents per share.
GE cut its full-year 2008 profit projection to a range of $1.95 to $2.10 per share, from the previous projection of $2.20 to $2.30 per share.
GE's stock fell 3% in early trading.
Shareholders of Delta Air Lines (DAL, Fortune 500) and Northwest Airlines (NWA, Fortune 500) are scheduled to vote on their merger, which would surpass AMR Corp.'s (AMR, Fortune 500) American Airlines as the biggest carrier in the world. The shareholders are expected to support the merger.
After the market close, Research in Motion (RIM), the Canadian maker of BlackBerry communication devices, is expected to release quarterly results. A consensus of analysts from Thomson FirstCall projects that third-quarter earnings will surge 74% to 87 cents per share, according to Briefing.com.
Economy: The Commerce Department announced that the manufacture of durable goods fell 4.5% in August, worse than the economists' expectation of a 1.3% decline. In July, orders had increased 0.8%. The decline was blamed on fewer airplane orders.