NEW YORK (AP) – U.S. stock futures pointed to a huge rally Monday as investors rushed to lay bets on a broad economic recovery following the weekend announcement that the U.S. government plans to bail out mortgage lenders Fannie Mae and Freddie Mac. Stock futures jumped more than 1 percent.
Meanwhile, bond prices fell sharply as emboldened investors looked for riskier but higher-yielding bets.
The weekend announcement that the Treasury Department was seizing control of the companies, which own or back about half the nation’s mortgage debt, brushed aside persistent worries that the companies would be felled by a spike in bad mortgage debt.
The plan to guarantee the debt of government-chartered mortgage giants could not only help lower mortgage rates but, some investors are hoping, buoy the overall economy. The government’s steadying hand for two institutions that many Wall Street observers had said were simply too big to let fail, could make lenders more willing to offer mortgages, though troubles with falling home values could still weigh on consumers.
Dow Jones industrial average futures surged 245, or 2.18 percent, to 11,472. Standard & Poor’s 500 index futures rose 33.00, or 2.66 percent, to 1,274.10. And Nasdaq composite index futures rose 33.50, or 1.89 percent, to 1,803.50. Stocks finished last week with steep losses amid worries about the overall economy and the financial sector.
Bond prices pulled back sharply Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.79 percent from 3.69 percent late Friday. The dollar was higher against other major currencies, while gold prices rose.
Light, sweet crude rose $1.38 to $107.61 in premarket electronic trading on the New York Mercantile Exchange.
The U.S. government’s plan touched off a global stock rally Monday. Japan’s Nikkei stock average jumped 3.4 percent and Hong Kong’s Hang Seng index surged 4.3 percent. In afternoon trading, Britain’s FTSE 100 jumped 3.81 percent, Germany’s DAX index rose 3.22 percent, and France’s CAC-40 surged 4.65 percent.
In corporate news, Washington Mutual Inc. said it has removed Kerry Killinger from the chief executive spot. The savings and loan company is working to overhaul its business, which has been hurt by bad mortgage debt. Alan H. Fishman is replacing Killinger.
Altria Group Inc. announced it will buy UST, the maker of Skoal and Copenhagen smokeless tobacco, for nearly $10 billion. The maker of Marlboro cigarettes said it will pay $69.50 per share. UST shares jumped Friday to finish at $67.55 following a report of the deal.