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US stocks rise, Knight Capital gets lifeline
NEW YORK—US stocks edged higher on a day marked by uncharacteristic quiet following a turbulent week. In the absence of major economic news, stocks were riding a tailwind of optimism from the most recent US job numbers released last week and hope for more action by European authorities to address that region’s debt crisis. Beleaguered stock trading company Knight Capital Group said yesterday it has lined up US$400 million in financing that will allow the firm to continue to operate. Knight was fighting for survival after a disastrous software glitch in its systems sent the trading of dozens of stocks into chaos last week. Best Buy’s stock soared after its founder offered to buy the company. The Dow Jones industrial average closed up 21.34 points at 13,117.51. The broader Standard & Poor’s 500 index added 3.24 points to 1,394.23. The index came within half a point of 1,400, where it hasn’t traded since May 3.
The Nasdaq index rose 22.01 points to 2,989.91. Markets fell the first four days of last week after investors were disappointed by the lack of specific action from central banks in Europe and the US to support the economy. The Dow lost 197 points from Monday through Thursday. The Dow soared 217 points on Friday, however, following a surprisingly strong jobs report. The US economy generated 163,000 jobs last month, the fastest pace since February and far more than economists were expecting. The upturn was seen as a sign that the US may be resilient enough to pull out of a midyear slump and grow modestly, even as the rest of the world slows down. Investors drove markets higher yesterday on hopes that the positive momentum will continue. Stock indexes also rose in Europe. Speculation has been building that the European Central Bank will support struggling countries like Spain and Italy by buying bonds issued by those governments. Germany’s DAX and the CAC-40 in France both rose a little less than 1 per cent. Spain’s IBEX 35 soared 4.4 per cent despite a five-hour blackout from a technical problem that halted trading for much of the day. “Mutual fund managers and hedge funds have sizable holdings in cash and they need to put those to work,” said Richard Cripps, chief investment officer for Stifel Financial. “There’s optimism over the progress made in Europe and also constructive news from the US economy.”
Knight Capital’s stock fell 98 cents, or 24 percent, to US$3.07 Monday. It’s down 70 per cent since last Tuesday, the day before a software malfunction caused its computer systems to send erroneous orders flooding into the market. Knight said a group of investors agreed to buy US$400 million of preferred stock that can be converted into a 73 per cent stake in the firm. Knight takes orders for stock trades from brokers like TD Ameritrade and E-Trade and banks. It then routes them to the exchanges where stocks are traded, like the New York Stock Exchange. Its future was thrown into doubt after the trading malfunction cost the firm US$440 million. Going in the opposite direction was Best Buy Co., which jumped 13 per cent after founder and former CEO Richard Schulze offered to buy the company at a premium to its stock price. Schulze, 71, is its largest shareholder with a 20 per cent stake. (AP)
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