U.S. stocks rise on hopes of Fed rate cut
NEW YORK, Aug. 22 (UPI) -- U.S. stock indexes closed up 1 percent Wednesday on growing hopes the U.S. Federal Reserve would cut interest rates.
The Dow Jones industrial average advanced 145.27 points, or 1.11 percent, to 13,236.13. The broader Standard & Poor's 500 Index climbed 16.95 points, or 1.17 percent, to 1,464.07.
On the New York Stock Exchange, 2,704 stocks rose and 661 declined, on volume of 3.3 billion shares traded.
The technology-heavy Nasdaq Composite Index added 31.50 points, or 1.25 percent, to 2,552.80.
In London, the FTSE 100 index closed up 109.90 points, or 1.81 percent, at 6,196.00.
Japan's Nikkei 225 index finished the day virtually flat, down 0.70 points, or a negligible percentage, at 15,900.64.
The benchmark 10-year U.S. Treasury note fell 13/32, yielding 4.647 percent, while the 30-year bond was down 7/32, yielding 4.965 percent.
The U.S. dollar rose to 115.09 yen from 114.42 yen in New York late Tuesday. The euro rose to $1.3537 from $1.3466.
BoA said to invest $2B in Countrywide
CHARLOTTE, N.C., Aug. 22 (UPI) -- Bank of America Corp. has agreed to buy $2 billion of stock in embattled U.S. mortgage giant Countrywide Financial Corp., a published report said Wednesday.
Bank of America's preferred-stock purchase, yielding 7.25 percent, can be converted into common stock at $18 a share, The Wall Street Journal reported.
Countrywide, with the nation's biggest mortgage loan volume, tapped an entire $11.5 billion credit line to help fund operations last week, prompting some Wall Street analysts to suggest the company could go bankrupt if market conditions worsened.
The Calabasas, Calif., lender -- which delivered a 23,000 percent return between 1982 and 2003 -- is struggling with many rivals to regain investor and depositor confidence amid a surge in mortgage defaults.
The company took out full-page advertisements in The New York Times and other newspapers saying federally insured deposits at its Countrywide Bank unit were safe and the bank was "well capitalized."
Countrywide said it would use its bank to fund a much larger proportion of its loans in the future.
The lender said in an e-mail Monday it was eliminating some 500 jobs in its Full Spectrum lending division, which handles mortgages for customers who do not qualify for the best rates.
4 big U.S. banks use Fed's discount window
NEW YORK, Aug. 22 (UPI) -- Four large U.S. banks Wednesday said they each borrowed $500 million from the Federal Reserve's "discount window," adding liquidity to the credit markets.
Citigroup Inc., J.P. Morgan Chase & Co., Bank of America Corp. and Wachovia Corp. said they borrowed $500 million apiece.
Citigroup said it borrowed the money "on behalf of clients." The other banks said in a joint statement they borrowed the money "to display the effectiveness of the facility."
"While JPMorgan Chase, Bank of America and Wachovia each have substantial liquidity and the capacity to borrow money elsewhere on more favorable terms, the companies believe it is important at this time to take a leadership role in demonstrating the potential value of the Fed's primary credit facility and to encourage its use by other financial institutions," the banks said.
Citigroup said it stood "ready to continue to access the discount window as client needs and market conditions warrant."
The Federal Reserve encouraged banks to borrow from the discount window Friday, the same day it lowered the discount rate, charged on direct Fed loans to banks, to 5.75 percent from 6.25 percent.
It had established the discount window as a way for the Fed to lend to banks having difficulty raising funds elsewhere.
Banks have rarely used the option because it generally carries a stigma, since it is seen as a struggling bank's last resort, The Wall Street Journal reported.
GM cuts overtime shifts at truck plants
DETROIT, Aug. 22 (UPI) -- General Motors Corp. said Wednesday it cut overtime shifts at plants making full-size pickup trucks and sport utility vehicles due to slumping U.S. demand.
The canceled overtime, implemented at six North American plants Monday, will continue for the rest of the year, spokesman Tom Wickham told The Detroit News.
The automaker -- which has seen truck and SUV inventories balloon as consumer demand slumps -- wants to clear dealer lots and avoid a surplus that would force "excessive discounts" on vehicles such as the Suburban SUV and new full-size pickups, Wickham said.
By reducing overtime, GM will take a hit on revenue because vehicles are booked as revenue when they roll off the assembly line, The Wall Street Journal reported.
Affected plants are in Flint, Mich.; Arlington, Texas; Janesville, Wis.; Fort Wayne, Ind.; Oshawa, Ontario, Canada; and Silao de la Victoria, Guanajuato, Mexico.
The automaker said in June it would increase North American output 2 percent in the third quarter. Any change to those plans will be announced Sept. 4, when the company releases August sales figures, Wickham said.
