Stocks rally late on news of settlement

July 16, 2010 at 12:00a.m.

Associated Press

NEW YORK

Stocks had a late-day turnaround and closed mixed Thursday as traders awaited news that Goldman Sachs is settling the government’s 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 their concerns about the economy.

A series of disappointing economic reports had sent the Dow Jones industrials down nearly 100 points in late trading. In the last half-hour, the Dow scrambled back to a loss of just 7. 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.