Facebook Twitter

Stocks rise on UBS and Lehman Brothers stock issuance, small contraction in manufacturing

SHARE Stocks rise on UBS and Lehman Brothers stock issuance, small contraction in manufacturing

NEW YORK — Wall Street rallied Tuesday, the first day of the second quarter, on news that two banks slammed by the credit crisis are working to raise cash and that U.S. manufacturing is faring better than expected. The Dow Jones industrial average soared more than 200 points.

Investors were pleased to hear that Swiss bank UBS AG said it will issue up to $15 billion in new stock and that its chairman, Marcel Ospel, had quit. Investors chose to look past the bank's announcement that it will take a fresh $19 billion write-down due to additional declines in the value of its mortgage assets and other credit instruments, following an $18 billion write-down last year.

UBS's decision to issue new stock arrived on the heels of a similar announcement by Lehman Brothers Holdings Inc. late Monday. The U.S. investment bank said it would sell 3 million convertible preferred shares due to "investor interest."

The pair of announcements buttressed the view that financial services companies are taking aggressive action to improve their capital bases. Shares of both UBS and Lehman surged Tuesday along with the rest of the financial sector. UBS's U.S. shares rose $2.99, or 10 percent, to $31.79, and Lehman rose $3.47, or 9 percent, to $41.11.

Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 — indicating a contraction, but a slower one than in February and tamer than many analysts had predicted.

Government data on construction spending for February also came in better than expected. The average economist was anticipating a drop of about 1 percent; instead, construction spending fell 0.3 percent in February compared to January.

The Dow Jones industrial average rose 217.48, or 1.77 percent, to 12,480.37.

Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 21.96, or 1.66 percent, to 1,344.66, and the Nasdaq composite index rose 40.57, or 1.78 percent, to 2,319.67.

Treasury bonds fell as investors pulled their money out of the safety of government securities and placed it into riskier assets. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.52 percent from 3.43 percent late Monday.

On Monday, Wall Street had managed a moderate gain in the final session of a dismal first quarter. Stocks prices and the major indexes ended the first three months of 2008 with massive losses, the casualties of the still continuing credit crisis. It was the worst quarter for the major indexes since the third quarter of 2002, when Wall Street was approaching the lowest point of a protracted bear market.

The stock market appeared revived on Tuesday, however.

In addition to optimism about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the euro. The euro fell to $1.5596 from $1.5785 late Monday in New York.

Investors also found solace in retreating commodities prices. Crude oil fell by $1.45 to $100.13 a barrel on the New York Mercantile Exchange, while gold dropped back below $900 an ounce.

The Russell 2000 index of smaller companies rose 10.29, or 1.50 percent, to 698.26.

Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange.

In overseas trade, Tokyo's Nikkei closed up 1.04 percent. There were gains in Europe too, with London's FTSE rising 1.50 percent, Frankfurt's DAX gaining 2.02 percent and Paris' CAC 40 advancing 2.02 percent.

On the Net:

New York Stock Exchange: www.nyse.com

Nasdaq Stock Market: www.nasdaq.com