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New York: US stocks ended a roller-coaster week with the Dow Jones Industrial Average climbing 4.8 per cent after the government's plans to buy stakes in banks spurred the biggest one-day rally since the Great Depression.
The weekly gains, the best for the Dow since 2003, came despite the steepest one-day drop since the October 1987 crash. The 30-stock average surged more than 900 points on October 13 and tumbled more than 700 points two days later on worsening retail sales data.
The VIX, the benchmark index for US stock options, closed on Friday at a record 70.33.
"The week has been incredibly volatile," said John Davidson, the president of PartnerRe Asset Management Corp, which oversees $12 billion (Dh44 billion) in Greenwich, Connecticut. "There's relief that the government is doing something, but also a realisation that it may take some time."
Record drop
The Standard & Poor's 500 Index lost 0.6 per cent on Friday dragged down by a record drop in consumer confidence and a 26-year low in housing starts, after swinging between gains and losses at least 28 times. The drop pared the measure's weekly climb to 4.6 per cent, with a close at 940.55. The Dow average fell 1.4 per cent to 8,852.22 on Friday.
The Dow jumped 11 per cent on October 13, rebounding from the worst weekly decline since 1914, on the government's plan to inject $250 billion into financial companies. Goldman Sachs Group Inc surged 29 per cent, the most in its 9-year history as a publicly-traded firm, to $114.30 after the Treasury Department said it would buy equity in nine of the biggest US lenders.
Nine out of 10 S&P 500 industries rose for the week. The London interbank offered rate showed credit markets are easing after the measure, which banks use to charge each other for three-month loans in dollars, fell for the first week since July. Warren Buffett's advice to buy American equities and better-than-estimated profit reports helped lift Coca-Cola Co and Google Inc for the week.
Sears Holdings Corp, the biggest US department-store company, slumped 14 per cent to $60.90 for a third week of losses. JC Penney Co slid 6.8 per cent to $21.09. Retail sales last month fell 1.2 per cent, the most in three years, the Commerce Department reported, as mounting job losses and declining home prices drove Americans to cut back spending.
Voluntary
The government will buy preferred shares in Goldman, Bank of America Corp, Bank of New York Mellon Corp, Citigroup Inc, JPMorgan Chase & Co, Merrill Lynch & Co, Morgan Stanley, State Street Corp and Wells Fargo & Co, people briefed on the Treasury Department's plan said. All of the banks except JPMorgan and State Street rose for the week.
Equity injections will be voluntary, aimed at "healthy" firms and have attractive terms, said Neel Kashkari, a Treasury official.
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