U.S. blue-chip stocks rose on Monday after reversing direction in the last hour of trade as the flight to safety into short-dated Treasury bills flagged, suggesting concerns over the stability of credit markets were receding.
U.S. three-month Treasury bill yields fell earlier in the session in their biggest one-day drop since the stock market crash of 1987 as investors pulled more money out of risky investments and sheltered it in one of the safest parts of the Treasury market. Later, yields rose as that flight to safety receded.
The Dow average was bolstered by shares of big manufacturers like Caterpillar Inc that may benefit from a cut in benchmark interest rates. The broad S&P 500 declined slightly, while the Nasdaq composite index finished a touch higher.
The U.S. Federal Reserve on Friday cut the discount rate it charges on bank loans in a bid to stabilize financial markets. The Fed's surprising move followed sharp declines in world stocks over the past month weeks as problems in the risky U.S. subprime mortgage sector spread to other markets.