Wall Street gains at the open
Markets gain as investors sift through AIG aid package, consider China stimulus.
NEW YORK (CNNMoney.com) -- Stocks surged Monday morning, with the Dow Jones industrial average rising as much as 215 points, after the U.S. government unveiled a sweeping restructuring plan for AIG and China announced a massive stimulus package.
The Dow Jones industrial average (INDU) added 160 points after rising as much as 215 points in the first few minutes of trade. The advance was roughly 1.8%. The Standard & Poor's 500 (SPX) index gained 1.3% and the Nasdaq composite (COMP) added 1.6%.
Asian markets ended Monday's session sharply higher after China unveiled a $586 billion stimulus package. European shares advanced in morning trading.
The Treasury said it would purchase $40 billion of newly-issued preferred AIG shares as part of the $700 billion bailout plan approved by Congress. As part of this agreement, the Federal Reserve is allowed to reduce the credit line it extended to AIG, to $60 billion from $85 billion. As part of the deal, AIG is freezing bonuses for the top 70 executives.
The insurance giant missed expectations when it reported dismal quarterly results Monday. The former Dow component posted a third-quarter adjusted net loss of $9.24 billion, or $3.42 per diluted share. The company was expected to report a loss of 90 cents per share versus a profit of $1.44 a year ago, according to a consensus of analysts surveyed by Thomson Reuters.
AIG shares jumped 20% Monday morning.
Mortgage backer Fannie Mae (FNM, Fortune 500), which was forced to accept government assistance in September, reported a steep quarterly loss of $29 billion, due to an accounting charge and a rise in bad loans. Nonetheless, shares rose 4%.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter to Treasury Secretary Henry Paulson on Saturday that the administration should consider expanding the $700 billion financial industry bailout to include car companies.
DHL: German-based Deutsche Post World Net, the parent company of DHL, announced Monday that it was cutting 9,500 jobs as it discontinues air and ground operations within the United States.
The global delivery company said it will continue to operate between the United States and other nations. But it also said it was shutting down all ground hubs and reducing its number of stations to 103 from 412.
Circuit City: Circuit City Stores Inc., the No. 2 electronics seller, filed for bankruptcy protection Monday, thus becoming the latest retailer hurt by a worsening economic downturn.
The company will continue to do business and pay its workers while it restructures debt and its business operations, according to its Chapter 11 filing with the U.S. bankruptcy court in Richmond, Va.
Oil and dollar: Oil prices rose, as investors bet China's stimulus package would help underpin demand for crude. U.S. crude for delivery climbed $2.92 to $63.96 a barrel. The dollar gained against the yen but slipped versus the euro and the British pound.
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