Wall St. higher despite finance jitters

Wall Street managed to book solid gains Thursday in seesaw trade, amid lingering concerns about the financial health of two big mortgage finance firms and Lehman Brothers.

On the positive side of the ledger, traders said Dow Chemical's move to takeover a rival firm and a better-than-expected sales report from retail titan Wal-Mart had helped support the market.

But concerns about the financial health of Freddie Mac and Fannie Mae unsettled some investors who sold their shares in the government-chartered finance firms.

The blue-chip Dow Jones Industrial Average posted a rise of 81.58 points (0.73 percent) to close at 11,229.02.

The Nasdaq composite index gained 22.96 points (1.03 percent) to 2,257.85 and the Standard & Poor's 500 index increased 8.70 points (0.70 percent) to a close of 1,253.39.

"Investors still appear to be in a state of shock after the very poor market action the past five weeks and oil rising to 145 dollars per barrel," said Al Goldman, a chief market strategist at Wachovia Securities.

Analysts said the news from Dow Chemical and Wal-Mart had helped give stocks a boost during opening market activity.

Dow Chemical announced it had agreed to buy rival Rohm & Haas for 18.8 billion dollars in cash, to create what it said would be the world's leading specialty chemicals and materials company.

The deal includes three billion dollars in financing from billionaire Warren Buffett's Berkshire Hathaway and one billion from the Kuwait Investment Authority.

Retail giant Wal-Mart meanwhile unveiled a better-than-expected 5.8 percent jump in sales for the five weeks ended July 4, suggesting that American consumers may not be tightening spending as much as some economists fear.

Traders track Wal-Mart for clues on the strength of consumer spending, a key driver of economic growth, which has come under a sharper focus as the US economy has slowed.

Dow's stock fell 4.2 percent to 32.52 dollars while Wal-Mart's shares ended 0.8 percent lower at 57.21 dollars.

Investors continued to keep a wary watch on the stock of Freddie Mac and Fannie Mae.

The two firms, which have no explicit government backing despite their government charters, provide vital liquidity to the US home financing market by buying mortgages and repackaging them into security portfolios which are sold to investors.

Freddie Mac's shares dived 22 percent to finish at 8.00 dollars while Fannie Mae ended down 14 percent at 13.20 dollars.

Testifying before Congress, Treasury Secretary Henry Paulson said the two mortgage-financing firms are "adequately capitalized" in the face of a "challenging period."

The investment bank Lehman Brothers also continued to endure a sharp fall in its stock price. Its shares tumbled 12 percent to 17.30 dollars.

Wachovia, another bank, saw its shares drop 8.1 percent to 13.13 dollars after warning investors it could post a second quarter loss as high as 2.8 billion dollars.

US conglomerate General Electric said it is likely to spin off its industrial unit including its appliance division as part of planned reorganization. Its stock closed up 1.7 percent at 27.64 dollars a day before it announces its latest earnings.

Bond prices firmed as the yield on the 10-year US Treasury bond fell to 3.811 percent from 3.834 percent Wednesday and that on the 30-year bond declined to 4.421 percent against 4.428 percent.

Bond yields and prices move in opposite directions.

(Agencies)