NEW YORK - Stocks advanced yesterday as expectations for an interest-rate cut from the Federal Reserve and an uptick in pending home sales helped offset concerns over another round of losses related to subprime mortgages. The Dow Jones industrial average gained more than 100 points.
Investors remained upbeat ahead of the Fed's rate-setting meeting today. Policymakers are broadly expected to lower rates, though economists are still split over whether there will be a quarter-point or a half-point cut.
The National Association of Realtors gave Wall Street reason to be optimistic yesterday when it said its forward-looking index of U.S. home sales rose in October. Though investors still expect the housing market to remain weak well into 2008, the association is forecasting that sales and prices will start recovering modestly next year.
The downturn in housing has led to huge losses among banks that invested in securities backed by mortgages.
Yesterday, UBS AG revealed large write-downs. The Swiss bank wrote down $10 billion in subprime-mortgage holdings, which could lead to full-year losses. However, its U.S. shares rose $1.18, or 2.34 percent, to $51.66 after the bank announced plans for a cash infusion of about $11.5 billion from the government of Singapore and an unidentified Middle Eastern investor.
After the closing bell, Washington Mutual Inc. said it would record a $1.6 billion write-down on its home-loan business as it announced plans to discontinue all subprime-mortgage lending and eliminate thousands of jobs. The nation's largest savings and loan now expects a loss in the fourth quarter because of the write-down.
The Dow rose 101.45, or 0.74 percent, to 13,727.03. The Standard & Poor's 500 index rose 11.30, or 0.75 percent, to 1,515.96. The Nasdaq composite index added 12.79, or 0.47 percent, to 2,718.95.
The dollar was mixed against other major currencies, and gold prices rose.
Washington Mutual's shares rose 85 cents, or 4.47 percent, to close at $19.88 in regular trading but fell in aftermarket activity.
The Blackstone Group L.P. might be planning a bid to acquire steel company Rio Tinto Group, according to Britain's Daily Telegraph. Blackstone would lead a consortium that would include China's sovereign wealth fund, according to the report. Blackstone shares rose $1.52, or 6.93 percent, to $23.45, and Rio Tinto rose $9.71, or 2.07 percent, to $477.71.
McDonald's Corp., the world's largest fast-food company, said global same-store sales had risen 8.2 percent in November. Much of the strength came from overseas, including Europe and Asia. McDonald's, one of the 30 Dow components, rose $1.74, or 2.89 percent, to $61.90.
Shares of Dow component Caterpillar Inc. advanced after a Bear Stearns Cos. Inc. analyst highlighted the construction-and-farm-equipment-maker's focus on China, where the construction market is expected to keep surging. The stock rose $2.38, or 3.21 percent, to $76.58.
The Russell 2000 index of smaller companies rose 5.68, or 0.72 percent, to 791.22.