U.S. stocks climbed Friday, as financial stocks rallied in the last hour of the session on speculation that U.S. Congress will agree on the government's rescue plan over the weekend. Bank of America and JPMorgan Chase led the rally.
Stocks tumbled in early trading, as the bailout plan fell through and Washington Mutual Inc., one of the U.S. largest banks, was seized by the Federal Deposit Insurance Corp. late Thursday.
The setback of the 700 billion U.S. dollars bailout plan unnerved investors. A group of House Republicans declined to support the proposed rescue plan by Treasury Secretary Henry Paulson Thursday, not long after key lawmakers of both parties declared they'd reached fundamental agreement on the rescue plan.
Investors also seemed unease after the Federal Deposit Insurance Corp. seized Washington Mutual on Thursday and sold its branches and assets to JPMorgan Chase for 1.9 billion dollars. It was the largest U.S. bank failure in history. JPMorgan Chase announced that it would raise ten billion dollars in new capital from sale of common stocks.
However, stocks rebounded from the day's lows after the U.S. president George W. Bush predicted lawmakers will reach a deal on the government's bailout plan. And Democratic and Republican leaders vowed to keep Congress in session until a deal has been reached.
But the market was cautiously optimistic about the plan, especially after an economic report indicated the U.S. economy was weaker than expected. The U.S. Commerce Department reported Friday that gross domestic product, or GDP, increased at a 2.8 percent annual rate in the second quarter. That fell short of the 3.3 percent growth estimated a month ago.
In corporate news, Research In Motion tumbled the most in seven years and dragged down the Nasdaq, after the company forecast earnings that missed estimates.
The Dow Jones rose 121.07, or 1.1 percent, to 11,143.13. Broader indexes traded mixed. The Standard & Poor's 500 index rose4.09, or 0.34 percent, to 1,213.27; and the Nasdaq fell 3.23, or 0.15 percent, to 2,183.34.