Stocks advance amid hope for automaker rescue

[December 13, 2008]  NEW YORK (AP) -- Wall Street put on another impressive show of resilience Friday, rebounding from an early sell-off to end higher after the government said it would assist troubled U.S. automakers.

The market, which just a week earlier withstood a terrible November employment report, managed its advance after the Treasury Department said it was prepared to assist the nation's Big Three automakers. The Dow Jones industrial average had fallen more than 200 points in early trading after the Senate had killed a $14 billion bailout package for the companies.

"It's hard to say if this is indeed the beginning of a recovery, but it could be," said Matt King, chief investment officer of Bell Investment Advisors. "It seems like the past few Fridays we've ended the week on a positive note."

A week ago, the market shook off the Labor Department's report that the economy lost a larger than expected 533,000 jobs in November. Investors are showing a greater tolerance for bad economic and corporate news, and many analysts believe that the market may have reached a bottom after the horrific selling of the past three months.

Since its Nov. 20 low, the Dow is up 14.3 percent, the Standard & Poor's 500 is up 16.9 percent and the Nasdaq composite index has seen a gain of 17.1 percent. Still, from their October 2007 highs, the Dow remains down by 39.1 percent and the S&P 500 index is down 44 percent. The Nasdaq, which peaked at the start of the decade, is down 46.1 percent from its recent top.

Many analysts believe Wall Street is growing more confident that the government's steps to stimulate the economy, including its $700 billion bank bailout program, will work. And so news that the Treasury Department could help prevent bankruptcy filings and job losses in the auto industry helped turn the market around Friday.

"Things are looking a little bit brighter after they made those announcements," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

Some of the market's moves Friday were with an eye toward next week's Federal Reserve decision on interest rates. The two-day meeting begins Monday; the Fed is widely expected to lower its key federal funds rate half a percentage point to 0.5 percent, another step by the government toward lifting the economy out of recession.

The Dow rose 64.59, or 0.75 percent, to 8,629.68. The Dow tumbled 196 points Thursday as worries intensified that the auto bill would stall in the Senate.

The S&P 500 index rose 6.14, or 0.70 percent, to 879.73, and the Nasdaq rose 32.84, or 2.18 percent, to 1,540.72.

For the week, the Dow ended with a loss of fewer than 6 points, or 0.07 percent. The S&P 500 rose 0.42 percent, while the Nasdaq advanced 2.08 percent because of Friday's gains. For the year, the Dow is down 34.9 percent, the S&P 500 is down 40.1 percent and the Nasdaq is off 41.9 percent.

The Russell 2000 index of smaller companies rose 17.22, or 3.82 percent, to 468.43 Friday.

The number of stocks advancing outpaced decliners by 3-to-2 on the New York Stock Exchange, where consolidated trading volume came to 5.12 billion shares compared with 5.39 billion Thursday.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.58 percent from 2.63 percent late Thursday. The yield on the three-month T-bill rose to 0.04 percent from 0.02 percent late Thursday. The bill has been in great demand because of the safety it offers investors.

The dollar was mixed against other major currencies, while gold prices declined.

Light, sweet crude fell $1.70 to settle at $46.28 on the New York Mercantile Exchange.

The day's economic news showed continuing weakness, but, as it has done with a steady stream of downbeat data in recent weeks, the market shrugged.

The Labor Department said wholesale prices sank in November for the fourth straight month, raising deflation fears. The Producer Price Index fell a greater-than-expected 2.2 percent as prices for gasoline and other energy prices retreated. That followed a record 2.8 percent drop in October.

Businesses also slashed inventories in October by the largest amount in five years. The Commerce Department said businesses cut what was on shelves and back lots by 0.6 percent, triple the 0.2 percent decline economists expected.

The Commerce Department said retail sales fell by 1.8 percent in November. The decline was less than the 1.9 percent slide economists expected but the drop marked the fifth straight monthly decline -- a period of weakness never before seen on the government's retail sales records.

Next week's readings include the Consumer Price Index and housing starts for November.

The week also brings quarterly results from Wall Street's brokerages, which have been badly hurt by the stock market's tumble, the slowdown in the economy and the freeze-up in the credit markets.

GM ended down 18 cents, or 4.4 percent, at $3.94 after declining as much as 37 percent in the session. Ford rose 14 cents, or 4.8 percent, to $3.04. Chrysler isn't publicly traded.

But even a potential lifeline for Detroit couldn't ease all the concerns about job losses. Bank of America Corp. said late Thursday it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September. Bank of America rose 2 cents to $14.93.

Investors grappled with further prospects of diminished confidence in Wall Street. Late Thursday, Wall Street veteran Bernard L. Madoff was arrested on a securities fraud charge. Madoff, who 18 years ago was chairman of the Nasdaq stock market, was accused of running a phony investment business that lost at least $50 billion and that he called a "giant Ponzi scheme," prosecutors said.

"It's not a happy day when you see a $50 billion fraud," said Ken Mayland, president of research firm ClearView Economics. "Things like that will just erode the public's confidence in the market."

Overseas, Japan's Nikkei stock average fell 5.56 percent. Britain's FTSE 100 fell 2.47 percent, Germany's DAX index slid 2.18 percent, and France's CAC-40 declined 2.80 percent.

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The Dow Jones industrial average ended the week down 5.74, or 0.07 percent, at 8,629.68. The Standard & Poor's 500 index finished up 3.66, or 0.42 percent, at 879.73. The Nasdaq composite index ended the week up 31.41, or 2.08 percent, at 1,540.72.

The Russell 2000 index finished the week up 7.34, or 1.59 percent, at 468.43.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended at 8,800.18, up 63.04 points, or 0.72 percent, for the week. A year ago, the index was at 14,993.96.

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On the Net:

New York Stock Exchange: http://www.nyse.com/

Nasdaq Stock Market: http://www.nasdaq.com/

[Associated Press; By SARA LEPRO and TIM PARADIS]

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