AP
Business Highlights
Thursday September 18, 6:25 pm ET

Stocks surge on report of entity for bad debt

NEW YORK (AP) -- Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government might create an entity to absorb banks' bad debt.

The report also cooled investors' fervor for safe investments like government debt that were in demand for much of the day.

The report that Treasury Secretary Henry Paulson is considering the formation of a vehicle like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left previously solemn investors ebullient.

AP source: US weighing financial crisis plans

WASHINGTON (AP) -- The government is weighing several options to ease Wall Street's worst financial crisis in decades, according to a person with knowledge of the talks. But taking over banks' bad debt, an idea that rallied the stock market on Thursday, is no certainty.

Stocks surged late in the afternoon after a report that the administration was considering creating a government entity patterned after the Resolution Trust Corp. created in the 1980s in the aftermath of the savings and loan crisis.

But the official, speaking on condition of anonymity because of the sensitivity of the discussions, said the talks have not narrowed to a single option.

Congressional leaders were told they would get a briefing at 7 p.m. from Paulson and Federal Reserve Chairman Ben Bernanke, Majority Leader Steny Hoyer, D-Md., told the AP.

Morgan Stanley, banks rush to complete deals

NEW YORK (AP) -- Wall Street entered into another round of speed dating, with bankers representing Morgan Stanley and Washington Mutual scrambling to put together deals in the biggest realignment of the financial industry since the 1930s.

Once vaunted investment banks like Bear Stearns, Merrill Lynch & Co. and Lehman Brothers Holdings Inc. have lost their independence or been toppled at a breath-taking pace.

Fed, central banks move to boost global confidence

NEW YORK (AP) -- The Federal Reserve and central banks in other countries pumped billions of dollars into the world's banking system in an urgent bid to stop further damage.

The Fed plowed as much as $180 billion into money markets overseas.

At home, the New York Federal Reserve acted to ease a spike in overnight lending rates by injecting $55 billion into the banking system.

New York AG launches probe of short-selling

NEW YORK (AP) -- New York state is launching an investigation into whether some traders used illegal tactics to drive down the stock price of several Wall Street firms.

Attorney General Andrew Cuomo told reporters Thursday his office has received a "significant number" of complaints about short sellers, or investors who hope to profit by placing bets that a financial company's stock will fall.

Short-selling is not illegal. But Cuomo said he will focus on whether short sellers engaged in conspiracy or spread rumors and bad information to influence the stock prices of Lehman Brothers Holdings Inc., American International Group Inc., Goldman Sachs Group Inc., Morgan Stanley and other firms that have been hammered in the ongoing financial crisis.

Jobless claims rise due to Hurricane Gustav

WASHINGTON (AP) -- New applications for unemployment benefits rose unexpectedly last week, largely due to Hurricane Gustav, the government said Thursday, adding further strain to the economy.

The Labor Department reported that initial jobless claims rose to a seasonally adjusted 455,000, up 10,000 from the prior week. Wall Street economists had expected claims to fall slightly to 440,000.

Layoffs can worsen the nation's economic woes as newly unemployed workers and those that fear for their jobs cut back on their spending and fall behind on their debts. Consumer spending accounts for about two-thirds of the economy.

Putnam Fund closes after investors pull cash

BOSTON (AP) -- Putnam Investments on Thursday suddenly closed a $12 billion money-market fund and announced plans to return investors' money after institutional clients pulled out cash despite the fund's lack of exposure to troubled financial firms such as Lehman Brothers Holdings Inc.

The move, believed to be unprecedented in the nearly $3.4 trillion money-market fund industry, came a day after asset managers sought to reassure investors in the wake of a massive pullout from large retail fund Reserve Primary Fund. The run on that fund caused its assets to plunge in value by nearly two-thirds and fall below $1 for each dollar invested, exposing investors to losses of 3 cents on the dollar.

While Boston-based Putnam said its Prime Money Market Fund continued to hold $1 in assets per dollar share as of Tuesday, it "experienced significant redemption pressure" on Wednesday.

Oil prices end higher as stock market rallies

NEW YORK (AP) -- Oil prices rose modestly but closed well off their session highs Thursday as a late-day stock market rally soothed investors' concerns about the economy and demand for energy.

Earlier, the contract topped $100 a barrel as investors uneasy about the worsening financial crisis flocked to commodities as a safe haven.

Oracle 1Q profit rises 28 percent, beats Street

Oracle Corp. said Thursday its fiscal first-quarter profit jumped 28 percent, beating Wall Street's expectations, as software sales stayed steady despite turmoil in the U.S. economy.

The business software maker's net income for the three months ended Aug. 31 rose to $1.08 billion, 21 cents per share, from $840 million, 16 cents per share, a year ago.

Excluding expenses for employee stock options and acquisitions, Oracle posted earnings of 29 cents per share, two cents better than analysts had expected, according to a Thomson Reuters poll.

California home sales surge as prices plummet

LOS ANGELES (AP) -- Home sales in California surged 13.6 percent in August as a flood of foreclosures drove down prices.

The figures released Thursday by MDA DataQuick showed 37,988 new and preowned homes were sold statewide last month, up 13.6 percent from August 2007 but down 3.8 percent from July.

The firm said 46.9 percent of all homes sold last month were foreclosed properties.

That helped send the statewide median home price plunging 35.3 percent to $301,000 during the year ended in August.

MidAmerican Energy to buy Constellation for $4.7B

Constellation Energy Group Inc., the nation's largest wholesale power seller whose stock has collapsed amid worries about liquidity and accounting issues, agreed on Thursday to be bought by a unit of Warren Buffett's Berkshire Hathaway Inc. for $4.7 billion.

Des Moines, Iowa-based MidAmerican Energy Holdings Co. will give Constellation an immediate $1 billion infusion.

MidAmerican will pay $26.50 per share in cash for Baltimore-based Constellation, well off the utility's 52-week high of $107.97 reached Jan. 8. The shares traded as high as $67.87 last week before hitting a low of $13 Tuesday.

By The Associated Press

The Dow soared 410.03, or 3.86 percent, to 11,019.69, surging 560 points from its low of the day, 10,459.44. It was the Dow's biggest percentage point gain since October 2002 but still leaves the index down about 400 points for the week after routs Monday and Wednesday.

Broader stock indicators also jumped. The Standard & Poor's 500 index rose 50.12, or 4.33 percent, to 1,206.51, and the Nasdaq composite index advanced 100.25, or 4.78 percent, to 2,199.10.

Light, sweet crude for October delivery added 72 cents to settle at $97.88 a barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil futures fell nearly 4.23 cents to settle at $2.7824 a gallon, while gasoline prices added nearly 2 cents to finish at $2.4824 a gallon. Natural gas for October delivery slipped nearly 3 cents to close at $7.621 per 1,000 cubic feet.

In London, November Brent crude added 35 cents to end at $95.19 a barrel on the ICE Futures exchange.