By Jennifer Yousfi
Managing Editor
The U.S. markets had strong gains yesterday (Tuesday), marking the strongest second quarter start since 1938, as a rally in financial stocks led all three major indices to post gains of more than 3%.
At the New York close, the blue-chip Dow Jones Industrial Average Index had posted a gain of 391.96 points (3.20%), to close at 12,654.85. The tech-laden Nasdaq Composite Index increased 82.14 points (3.60%), to reach 2,361.24. And the broader Standard & Poor's 500 Index rose 47.17 points (3.57%), to hit 1,369.87.
All sectors were up with the financial sector (up 4.47%), the services sector (up 3.29%) and the technology sector (up 3.18%) posting the biggest gains.
"The market's getting a little more comfortable that the crisis is over," Henry Herrmann, president and chief executive officer of Waddell & Reed Financial Inc. (WDR) in Overland Park, Kansas, which manages $65 billion, told Bloomberg News. "It's a rally associated with the presumed elimination of survival risk."
Shares of Lehman Brothers Holdings Inc. (LEH) were up over 17% after the firm announced it would offer $4 billion in convertible preferred stock. Investor response to Lehman's offering has been overwhelmingly positive. Lehman stock gained $6.68 for the day to close at $44.32.
"It's three times oversubscribed; people are interested in investing in Lehman," Art Hogan, chief market strategist at Jefferies & Co., told MarketWatch.
UBS AG (UBS) also announced it would try to raise additional capital and despite estimating a $19 billion first quarter loss, U.S.-listed and European-listed shares rose. Shares gained $4.23, an almost 15% increase, to close at $33.03.
"To the extent the market is comfortable that they're able to add to their capital base, it means we are working our way through these problems," Alan Gayle, senior investment strategist at RidgeWorth Capital Management Inc., which oversees about $74 billion in Richmond, Virginia, told Bloomberg News. "There's hope we're seeing the end of the write-offs."
In overseas markets, Japan's Nikkei Index reversed about half of yesterday's losses with a 1% gain, adding 130.88 points to close at 12,656.42. Hong Kong's blue-chip Hang Seng Index gained 288.26 points, to close at 23,137.46.
European bourses were up as much as 3% as bank shares rallied, leading the Paris-based CAC40, London's FTSE 100, Madrid's IBEX 35 and the Frankfurt-based DAX to all post gains.
At the New York close, the dollar had gained ground against the euro (up 1.045%), the yen (up 3.030%) and the pound sterling (up 0.779%).
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