NEW YORK Stocks had a late-day turnaround and closed mixed Thursday as traders awaited news that Goldman Sachs settled the governments civil fraud charges.
As word spread that the Securities and Exchange Commission had scheduled a late-afternoon announcement, investors began buying on the belief that the government and Goldman Sachs Group Inc. had settled the charges that grew out of the sale of securities based on risky mortgages.
The $550 million settlement was announced less than an hour after trading ended. Goldman agreed to pay fines of $300 million, the largest fine against a financial company in SEC history, and $250 million to compensate investors who lost money on the securities. The deal also requires Goldman to review how it sells complex financial mortgage investments.
Anticipation of the settlement, which removes uncertainty that has hovered around Goldman since the charges were announced April 16, was enough to make traders temporarily set aside concerns about the economy. A series of disappointing economic reports had sent the Dow Jones industrials down nearly 100 points in late trading. The Dow scrambled back to a loss of just 7 by the close. Broader indexes were narrowly mixed.
Goldman was trading at about $140 a share when word of the pending announcement came. The stock then soared to close at $145.22, up $6.16, and shot up to $151.26 in after-hours trading.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said before the announcement that a settlement would come as a relief. The case hangs over the investment banks and the financial community in general, he said.
A little more uncertainty was lifted from the market late in the day, when the Senate passed and sent to President Barack Obama the financial regulation bill. However, because regulations that will implement the bills provisions have yet to be written, traders were still wary. Analysts said that likely contributed to the markets dip right before word of an SEC announcement.
Another step toward financial regulation may have sparked some fear and selling, said Todd Salamone, senior vice president of research at Schaeffers Investment Service.
The Dow fell 7.41, or 0.07 percent, to 10,359.31. The Standard & Poors 500 index rose 1.31, or 0.1 percent, to 1,096.48, while the Nasdaq composite index fell 0.76, or 0.03 percent, to 2,249.08.
Losing stocks were slightly ahead of gainers on the New York Stock Exchange, where volume came to 1.1 billion shares.