Dow Up 3 Percent; Retail Shares Gain

Retail stocks rose 1 percent Friday, regaining much the ground lost earlier in the week.

Retail stocks rose 1 percent Friday — regaining much of the ground lost earlier in the week — as the federal government moved to stabilize stock and credit markets by assuming responsibility for billions of dollars of toxic mortgages.

The 3.87-point gain in the Standard & Poor’s Retail Index left the measure at 394.24, just 3 percent below its level of one week ago and 5.5 percent above its close on Wednesday, when stocks sustained their biggest losses since the aftermath of the Sept. 11, 2001, terrorist attacks. The Dow Jones Industrial Average rose 368.75 points, or 3.4 percent, to close at 11,388.44, down just 0.3 percent for the week and 7.3 percent higher than on what some are calling “Black Wednesday.”

It was the government’s move to shore up the financial system and also stem the short-selling of financial stocks that appeared to reverse the market’s fortunes. Speaking of the bad credit that has fouled the credit world, Treasury Secretary Henry M. Paulson Jr. said Friday, “These illiquid assets are clogging up our financial system, and undermining the strength of our otherwise sound financial institutions. As a result, Americans’ personal savings are threatened, and the ability of consumers and businesses to borrow and finance spending, investment and job creation has been disrupted.”

The specifics of the plan are still being hammered out between the Bush administration and Congress.
The Wall Street rally came with the hint of a bit of much-needed stability after a tumultuous week that included the bankruptcy of Lehman Brothers, sale of Merrill Lynch and a government takeover of American Insurance Group.

For more coverage, see Monday’s issue of WWD.