NEW YORK — Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week.
The market’s turnaround came after nearly two days selling. The Dow Jones industrial average had been down more than 100 points, but by the close, showed a 225-point reversal from its lows of the session.
“There’s probably some validity to the rumors,” said Jim Herrick, manager of equity trading at Baird & Co., referring to traders’ speculation about Ambac. “With the overall financial crunch we’ve experienced, this brings new confidence in the sector.”
Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board’s monthly index of leading economic indicators.
“I think what really still seems to be dragging the market down are some of the manufacturing numbers,” said Ryan Detrick, strategist at Schaeffer’s Investment Research in Cincinnati, referring to the Philadelphia Fed report as well as regional manufacturing findings from the New York Fed last week. “It just shows that the fears that the U.S. economy is in recession are continuing to dominate.”
Light, sweet crude for April delivery rose 58 cents to settle at $98.81 a barrel on the New York Mercantile Exchange amid concerns about potential supply disruptions and cold weather.
Detrick said that among the reports due next week, investors will be looking to readings on producer prices.