Wall Street Opens Higher a Day after Heavy Selling

NEW YORK - Stocks opened higher Thursday after IBM Corp. affirmed its profit forecast and investors hoped the government might take ownership stakes in banks to help stabilize the financial industry.

Investors also looked to recover from near-panic selling that cascaded through global markets in the past week. Stocks around the world moved mostly higher one day after the Federal Reserve and other leading central banks cut interest rates to help unclog the credit markets and stimulate the global economy.

There's some hope by investors that Wall Street is getting closer to finding a bottom after the worst six-day rout in years. On Wednesday, the Dow gave up 189 points to close at 9,258.10 — and was down about 35 percent from its high of 14,164.53 reached exactly one year ago.

"I think the base driver today is that we're oversold," said Arthur Hogan, chief market analyst at Jefferies & Co. "You can't do that too long before things turn around, and I think the bottom of this market gets put in this week."

While a rate cut can take up to a year to work its way through the economy, there were some positive signs Thursday that corporate earnings might come in better than expected. IBM, one of the 30 stocks that make up the Dow Jones industrials, posted third-quarter results that beat forecasts and affirmed its full-year earnings forecast after the markets closed on Wednesday.

Investors also appeared cheered by a plan being considered by the Bush administration to invest in hobbled U.S. banks as a way to stabilize the financial sector. An administration official, who asked not to be identified because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and obtain ownership shares in return.

Britain rolled out a similar plan, though no U.K. bank has received any investments. In Iceland, the government now has control of all three of the country's major banks as it struggles to contain the troubles there.

Late Wednesday, the U.S. government again came to the rescue of American International Group Inc. The Fed agreed to lend $37.8 billion to the ailing insurer, which is on top of an $85 billion loan AIG received last month.

Wall Street also gained some confidence after the government reported applications for unemployment benefits dropped last week from a seven-year high. The Labor Department's report matched projections, though claims still remain at elevated levels.

In the first half-hour of trading, the Dow Jones industrial average rose 145.93, or 1.55 percent, to 9,402.03.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 15.72, or 1.60 percent, to 1,000.66, and the Nasdaq composite index rose 32.56, or 1.87 percent, to 1,772.89.

The move back into stocks siphoned money away from safe haven investments like government bonds and gold.

Demand for short-term Treasurys waned, with the yield on the three-month Treasury bill, which moves opposite its price, rising to 0.71 percent from 0.63 percent late Wednesday. Longer-term debt prices also fell, with the yield on the 10-year note rising to 3.77 percent from 3.65 percent late Wednesday.

Investors will also be watching to see what effect short selling will have on the market now that a three-week ban imposed by regulators has expired. Some analysts believe the unprecedented ban on short selling — an effort to bolster investor confidence amid the worst financial crisis since the stock market crash of 1929 — did more harm than good at a time of historic market volatility.

Meanwhile, oil prices looked for direction as traders weighed fears that a world recession will crimp demand against speculation that OPEC may cut output to keep prices from falling too far. Light, sweet crude rose 14 cents to $89.09 per barrel on the New York Mercantile Exchange.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 153.8 million shares.

The Russell 2000 index of smaller companies rose 11.18, or 2.05 percent, to 557.75.

In Asia, Japan's Nikkei 225 closed down 0.50 percent while the Hang Seng added 3.31 percent. In afternoon trading, European bourses advanced, with Britain's FTSE-100 up 1.58 percent, Germany's DAX up 1.51 percent, and France's CAC-40 up 2.97 percent.