Stocks surged this morning as investors rushed to lay bets on a broad economic recovery following the weekend announcement that the US government will bail out mortgage lenders Fannie Mae and Freddie Mac. The major indices jumped, with the Dow Jones industrials gaining more than 300 points. Meanwhile, bond prices fell sharply as emboldened investors looked for riskier but higher-yielding bets.
The announcement yesterday that the Treasury Department was seizing control of the companies, which own or back about half the nation's mortgage debt, brushed aside investors' persistent worries that the companies would be felled by a spike in bad mortgage debt. "It saves Armageddon from happening," said one trader. "This helps the financials, this helps the housing market."