Investors Embrace Government Move to Take Stakes in U.S. Banks

Investors reacted favorably to announced plans by the U.S. government to spend up to $250 billion to take equity stakes in 9 major U.S. banks.  The Dow rose more than 300 points before pulling back to 9585, up nearly 200 points.  Nasdaq lost 5 points to 1839.

On the upside

Shares of Morgan Stanley (NYSE: MS) powered higher following news of both private and publicly-funded equity investments to shore up its balance sheet.  Bank of America (NYSE: BAC) and Citigroup (NYSE: C) were among the beneficiaries of the government's equity investment plans.

Insurer XL Capital (NYSE: XL) posted a sizable 3rd quarter loss due to a one-time payment to former subsidiary Syncora (NYSE: SCA) which would effectively end the company's exposure to the troubled bond insurer.

On the downside

PepsiCo (NYSE: PEP) posted lower 3rd quarter profits and announced cuts of 3,300 positions as U.S. drink sales fell.

EnergySolutions (NYSE: ES) blamed the financial crisis for delays in the decommissioning of identified nuclear power plant assets.

Rackable Systems (Nasdaq: RACK) lowered its 2008 revenue outlook due to delays in corporate purchases.

In the broad market, advancing issues outpaced decliners by a margin of more than 4 to 1 on the NYSE and by 3 to 1 on Nasdaq.  The Russell 2000 which tracks small cap stocks rose 10 points to 581.