Wall Street Shows Optimism That Crisis Is Fading

New York Times: Wall Street Shows Optimism That Crisis Is Fading

Stocks started the second quarter with a soaring rally on Tuesday that sent the Dow Jones industrial average up nearly 400 points, its best performance in two weeks, as investors found reasons to take heart in a fresh round of mortgage-related write-offs at UBS and Deutsche Bank and a capital infusion at Lehman Brothers, the brokerage firm.

The Standard & Poor’s 500-stock index gained 3.6 percent on the strength of a surge in shares of financial services firms. Lehman Brothers, the bond insurer MBIA and the mortgage giant Fannie Mae were among the index’s biggest gainers.

The rally continued in Asia on Wednesday, and in early European trading. The benchmark Japanese index ended more than 4 percent higher. European shares traded higher but fell back slightly in later morning trading. …

…Treasury yields rose and the dollar advanced against the euro, signs of increased confidence among investors that Wall Street will weather the credit crisis.

Oil and gold, traditional hedges against inflation, fell for the third consecutive session. And a pair of better-than-expected reports on the manufacturing and construction industries helped bolster the market, as well.

The Dow finished at 12,654.36, up 3.2 percent, or 391.47 points. The Nasdaq composite index gained 3.7 percent; the S.& P. 500 closed up 47.48 points at 1,370.18. …

…Investors were also buoyed by a drop in commodity prices, which have reached record levels in recent weeks. The declines in prices for oil, gold and wheat could translate to cheaper prices for consumers.

Crude oil dropped 60 cents on Tuesday, to just under $101 a barrel, its third decline in a row. Gasoline prices also traded lower. Gold, which becomes more expensive in times of crisis, declined to $887.80 a troy ounce after reaching $1,000 two weeks ago.