Financial, housing stocks push Dow up 175

Stocks surged after the Bush administration announced its bailout plan for some subprime mortgage borrowers.

The Dow Jones industrials jumped 175 points, or 1.3%, to about 13,620. The Nasdaq Composite Index was up 43 points to 1.6% to 2,709, and the Standard & Poor's 500 Index shot up 22 points, or 1.5%, to 1,507.

The Dow is up nearly 375 points in just two days and 6.9% since bottoming on Nov. 26. For the year, the blue-chip index is up 9.3%.

There were some clear winners from the Bush administration plan: home lenders and builders. KB Home (KBH, news, msgs), was the top S&P 500 stock with a 16.14% gain to $24.25, followed by Countrywide Financial (CFC, news, msgs) up 16.12% to $12.10. After that were four more builders: Lennar (LEN, news, msgs), up 15.3% to $18.73; Pulte Homes (PHM, news, msgs), up 12.7% to $11.51; Centex (CTX, news, msgs), up 12.7% to $25.18; and D.R. Horton (DHI, news, msgs), up 11.8% to $14.12.

While the Bush plan pushed financial and home-building stocks higher, there were other factors at play:

• Tech stocks continued to power ahead. Apple (AAPL, news, msgs), Google (GOOG, news, msgs), Intel (INTC, news, msgs), Research in Motion (RIMM, news, msgs) and Microsoft (MSFT, news, msgs) were the biggest contributors to a 20-point gain for the Nasdaq-100 ($NDX.X) stocks. All but Microsoft were up more than 2.4% or more; Google's close of $715.26, a 2.4% gain, was its first above $700 since Nov. 8. Microsoft finished up 1.2% to $34.55. (Microsoft is the publisher of MSN Money.)

• Oil prices jumped back over $90, pushing energy shares higher. Crude closed up 3.1% to $90.23 a barrel in New York. The Amex Oil Index ($XOI.X) jumped 2.3% to 1,478. Chevron (CVX, news, msgs) rose 2.3% to $91.38, and Schlumberger (SLB, news, msgs) jumped 3.2% to $98.89.

• Short sellers had to buy back shares when the S&P 500 pushed through 1,490. That level had been a key point of upside resistance for the index. Short sellers sell borrowed shares, hoping prices will fall. If they rise, they have to buy back the stocks to cover their positions.

The market largely ignored mediocre sales overall from major retailers in November.

How the Bush plan is supposed to work

The Bush proposal, already agreed to by banking regulators and mortgage lenders, includes a provision to freeze for five years interest rates on subprime mortgages that otherwise would be reset at higher rates.

But there was skepticism that the plan would work, in large part because the owners of the mortgages -- bond investors around the world -- are under no obligation to join the plan.

Standard & Poor's noted that a risk to the plan is lawsuits from investors in bonds backed by the mortgages. The longer that lower rates are extended, the more risk posed to the value of the bonds.

While S&P was careful to say it supports the concept of the plan, it added, "In certain instances, the negative effects may outweigh the positive benefits."

The plan -- an effort to contain a rising number of foreclosures -- applies to borrowers with loans made from Jan. 1, 2005 through July 31, 2007, with rates that are scheduled to reset between Jan. 1, 2008 and July 31, 2010.

• Talk back: What do you think of the bailout plan?

Owners have to live in their homes to participate in the plan -- an effort to prevent speculators from taking advantage of the plan.

The plan also envisions refinancing existing mortgages into fixed-rate loans either directly through private lenders or using Federal Housing Administration-insured loans.

In all, the proposal would help perhaps as many as 1.2 million homeowners facing serious problems in the next year, President Bush said this afternoon as he announced the plan.

• Read more about the plan

An estimated 2 million subprime mortgages will reset to higher rates next year, likely causing borrowers to struggle with higher payments. Some payments could jump 30% when rates reset.

Falling home prices add to the problem, as homeowners have more trouble selling their homes without taking a loss.

This morning, the Mortgage Bankers Association said that 1.69% of all borrowers were facing foreclosure in the third quarter. The number of people who fell behind on their mortgage payments grew, hitting a seasonally adjusted 5.59% delinquency rate -- a 20-year high, the association said.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$90.23	$87.49	$2.74	1.71%	47.80%
Heating oil (per gallon)	$2.5450	$2.4893	$0.0557	0.61%	59.27%
Natural gas (per million BTU)	$7.3300	$7.1850	$0.1450	0.38%	16.37%
Unleaded gasoline (per gallon)	$2.3013	$2.2170	$0.0843	1.87%	43.64%

NovaStar gets loan extension

Mortgage lender NovaStar Financial (NFI, news, msgs) won't be filing for bankruptcy -- at least for now. The company said late Wednesday that it received an extended waiver from one of its lenders, Wachovia (WB, news, msgs), until Friday.

• Video: Is the credit crunch over?

The original waiver ended Nov. 30. Without the extension, NovaStar could have had to pay $83.9 million in debt to Wachovia, along with $11.8 million in fees.

Shares of NovaStar jumped 60 cents, or 24%, to $3.08.

Toll Bros. reports first-ever loss

Amid a continued housing slump, home builder Toll Bros. (TOL, news, msgs) this morning reported its first loss in 21 years. But the stock was one of the beneficiaries of the Bush mortgage plan. The stock jumped 13% to $23.42.

The company said it lost $81.8 million, or 52 cents per share, in the fiscal fourth quarter -- a huge drop from net income of $173.8 million, or $1.07 per share, a year ago. Excluding write-downs for the value of land, the company lost 72 cents per share.

Still, the loss beat Wall Street's estimate of a loss of 77 cents per share. The company had reported profits every quarter since going public in 1986.

No question, the company said, its 2007 fiscal year was the most difficult its 40-year history.

Things also look pretty shaky for next year: "Given the numerous uncertainties related to sales paces, sales prices, mortgage markets, cancellations, market direction and the potential for and size of future impairments, in the current climate it is particularly difficult to provide guidance for fiscal-year 2008," Chief Financial Officer Joel Rassman said in the same statement.

Retail sales roundup

Retailers reported November sales at stores open at least one year today, and the news was dicey.

Among the winners: Costco Wholesale (COST, news, msgs) said November same-store sales rose 9%, thanks to international growth. Analysts had been looking for an increase of 6.6%. Shares were up 1.7% to $70.83.

High-end retailer Nordstrom (JWN, news, msgs) reported an increase of 8.7% for November; analysts had been expecting a 3.7% rise. Shares jumped 4.9% to $38.46.

• Video: Picking stocks to hold

Limited Brands (LTD, news, msgs), on the other hand, said same-store sales fell 7%; shares were up 2.1% to $20.32. A stimulant for the stock: CEO Leslie Wexner reported to the Securities and Exchange Commission that he'd bought 270,000 shares in the company on Monday, Tuesday and Wednesday.

Wal-Mart Stores (WMT, news, msgs) reported an increase of 1.9% in same-store sales in November; excluding fuel, sales at stores open one year or more rose 1.5%. Shares closed up 0.8% to $49.27.

Sales at U.S. retailers fell 4.4% last week -- the most since March -- with consumers taking a break from shopping after all the Thanksgiving and post-Thanksgiving sales, ShopperTrak said Wednesday.

The long holiday shopping season and harsh weather may have hurt sales last week, ShopperTrak said. With three full weekends left before Christmas, many consumers might be waiting until the last minute to finish their shopping.

Target warns of lower profits

Target (TGT, news, msgs) warned today that fourth-quarter earnings could miss the bull's-eye.

Shares dropped 7.6% to $55.57, second-worst among S&P 500 stocks after Family Dollar Stores (FDO, news, msgs), which fell 8.3% to $21.27.

Target said that sales at stores open at least one year were up 10.8%. Accounting for a change in the retail calendar, Target's same-store sales rose just 1.1%. Analysts had been looking for a rise of 10.3%.

Wachovia analyst Peter Benedict downgraded the stock to "market perform" from "outperform."

Short hits from the markets -- 4 p.m. ET

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	2.960%	2.980%	-0.020	-3.58%	-39.41%
5-year Treasury note yield	3.363%	3.276%	0.087	-1.61%	-28.46%
10-year Treasury note yield	3.998%	3.911%	0.087	0.65%	-15.12%
30-year Treasury bond yield	4.479%	4.391%	0.088	1.73%	-7.04%
Currencies
U.S. Dollar Index	76.45	76.47	-0.02	0.35%	-8.35%
British pound in U.S. dollars	$2.0284	$2.0296	-0.0012	-1.40%	3.51%
U.S. dollar in British pounds	£0.4930	£0.4927	0.0003	1.42%	-3.39%
Euro in U.S. dollars	1.4648	1.4624	0.0024	-0.06%	10.97%
U.S. dollar in euros	€ 0.6827	€ 0.6838	-0.0011	0.06%	-9.89%
U.S. dollar in yen	¥111.27	¥110.85	0.42	0.28%	-6.51%
U.S. dollar in Canadian dollars	$1.008	$1.010	-0.002	0.89%	-13.46%
Canadian dollar in U.S. dollars	$0.992	$0.990	0.002	-0.94%	15.60%
Commodities
Gold	$807.10	$803.70	$3.40	2.28%	26.50%
Copper	$3.0485	$3.0400	$0.009	-4.27%	6.18%
Silver	$14.6250	$14.6250	$0.16	3.25%	11.79%
Crude oil (NYMEX) (per barrel)	$90.23	$87.49	$2.74	1.71%	47.80%

Chrysler sees billion-dollar loss

U.S. automaker Chrysler is expecting a huge loss this year.

Chief Executive Officer Robert Nardelli, formerly of Home Depot (HD, news, msgs), told a group of employees that the company will lose $1.6 billion in 2007, far worse than the $618 million Chrysler lost in 2006. The automaker actually earned $1.8 billion in 2005.

• Video: The worst CEO of 2007

Nardelli said costs at the company would exceed $64 billion, according to published reports, with revenue of less than $63 billion.

Steven Landry, executive vice president of North American sales, said last week that Chrysler would lose $1 billion this year but would break even next year and return to profit in 2009.

Cerberus Capital Management bought an 80.1% stake in Chrysler from German automaker Daimler in May for $7.4 billion. Because Chrysler is now private, the company isn't required to report its financial results.

By Charley Blaine and Elizabeth Strott