Wall Street rises as investors exit safe government securities, takeover talk heats up

NEW YORK — Stocks jumped Wednesday as Wall Street interpreted a pullback in Treasurys and new talk of takeovers as signs that recent credit market tightness might be easing.

The 3-month Treasury bill — which earlier in the week drew massive buying as investors sought the safety of short-term government assets — fell Wednesday, driving its yield up to 3.80 percent from 3.59 percent late Tuesday.

"It gives the market a little comfort that it's not all about buying risk-free securities," said Scott Wren, equity strategist for A.G. Edwards & Sons. "There's less of a flight to quality. ... In my mind, the pullback in the stock market is entirely due to what's going on in the credit market. The fundamentals have been good. Valuations are reasonable. It's just the fear of the unknown in terms of the credit market."

Wall Street, which has been angling for the Federal Reserve to help ease the credit crunch by cutting the benchmark federal funds rate, has been knocked down several rungs in recent weeks by worries about lending troubles crimping economic and corporate growth.

Mergers and acquisitions, especially by private equity firms, had been one of the market's biggest drivers this year. Wednesday, investors were heartened by several reports about possible deals.

The Wall Street Journal reported that online brokerages TD Ameritrade Holding Corp. and E-Trade Financial Corp. have been discussing a possible deal, and that Dubai World, a holding company for the Persian Gulf city-state, is looking to acquire a 9.5 percent stake in MGM Mirage and a 50 percent ownership in the company's CityCenter development project. Meanwhile, Nymex Holdings Inc. Chairman Richard Schaeffer said Tuesday the commodities exchange owner has held preliminary discussions about a potential combination.

In midday trading, the Dow Jones industrial average shot up 116.57, or 0.89 percent, to 13,207.43.

Broader stock indicators also jumped. The Standard & Poor's 500 index rose 13.30, or 0.92 percent, to 1,460.42, while the Nasdaq composite index gained 25.58, or 1.01 percent, to 2,546.88.

As short-term government security prices fell, so did their longer-term counterparts. The yield on the benchmark 10-year Treasury note climbed to 4.64 percent from 4.59 percent late Tuesday.

Also calming investors, the Fed made a relatively small repurchase of $2 billion, in which it buys that amount in collateral from dealers, who then deposit the money into commercial banks.