The Dow Jones industrial average finished down about 25 points, but both the broader Standard & Poor's 500 and Nasdaq composite indexes posted moderate advances, finishing higher for the second straight week in a row. Stocks that rose outpaced those that fell by about 2 to 1 on the New York Stock Exchange.
Though the session was choppy - with the Dow rising as many as 182 points in early trading, then moving in and out of negative territory for much of the afternoon
- it was a relatively calm day on Wall Street compared with the wild swings experienced in September, October and early November.
In the early going, investors cheered the government's pledge to provide General Motors Corp. and Chrysler LLC with $13.4 billion in short-term financing, and another $4 billion at a later date.
The decision to provide emergency help to carry the struggling industry into the new year comes after a $14 billion bailout for the automakers failed to make it out of the Senate last week.
The companies' cash flows have been dwindling to a slow trickle due to the weak economy, slumping sales and the credit crunch.
But the aid hinges on conditions that must be quickly met; GM and Chrysler must prove viability, defined as positive cash flow and the ability to pay back government loans, by March 31. Ford Motor Co., meanwhile, is not asking for short-term assistance, but its CEO predicted the aid will stabilize the broader industry.
GM CEO Rick Wagoner said the company had much work ahead, but he was confident it could reinvent itself with the government help.
Some analysts expressed doubts.
"I think that there's a lot of skepticism about how much real reform we're likely to see, particularly at GM, given the parameters under which the loans have been made," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "There is a lot of skepticism about whether GM is prepared to do what needs to be done."
Still, the government's move staved off, for the time being, a major bankruptcy that could have sent a debilitating blow to the economy and the labor market.
Investors have been concerned about the job market ramifications of a possible bankruptcy filing by an automaker like GM or Chrysler, which some analysts said could result in up to 3 million U.S. job losses. The government lost more than half a million jobs in November, and the Labor Department said Thursday that new claims for unemployment remained well above 500,000 last week. When unemployment rises, spending declines and credit deteriorates.
The White House's action Friday "prevents the collapse of a very high profile industry less than a week before Christmas," said Phil Orlando, chief equity market strategist at Federated Investors. "That's not to say that these guys won't collapse next March, but it takes it out of the headlines now, and takes the threat of an auto industry default off the table until next spring."
GM shares jumped 83 cents, or 23 percent, to close at $4.49, while Ford shares added 11 cents or 3.9 percent to $2.95. Chrysler is not publicly traded.
The Dow fell 25.88, or 0.30 percent, to 8,579.11. The Standard & Poor's 500 index rose 2.60, or 0.29 percent, to 887.88, while the Nasdaq composite index rose 11.95, or 0.77 percent, to 1,564.32.
For the week, the Dow ended down 0.59 percent, while the S&P 500 finished up 0.93 percent and the Nasdaq up 1.53 percent. All of the indexes are still down more than 35 percent for the year.
The technology-heavy Nasdaq was lifted by big gains from Oracle Corp. and Research In Motion Ltd., both of which released earnings reports after the bell on Thursday. Oracle's profit weakened for the first time in years, but its shares rose 7 percent as investors bet that the company will fare better than others as the economy struggles. BlackBerry-maker Research In Motion rallied $4.39, or 11 percent, to $42.83, after reporting better-than-expected revenue guidance for the fourth quarter and strong holiday sales of its new smart phones.
The Russell 2000 index of smaller companies rose 7.09, or 1.48 percent, to 486.26.
Consolidated volume on the NYSE came to 6.04 billion shares, up from 5.46 billion on Thursday.
Some analysts attributed much of the market's choppiness on Friday to the expiration of options contracts, as well as the routine rebalancing of stock indexes.
Earlier Friday, Treasury Secretary Henry Paulson said that Congress should release the second $350 billion from the rescue fund that it approved in October to bail out financial institutions. Paulson said tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.
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At the same time, he said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. had the resources to address a significant market event if one should occur before Congress approves the use of the second half of the largest government bailout program in history.
Meanwhile, the industry that has already gotten billions in government funding
- the financial sector - remains in sad shape. On Friday morning, Standard & Poor's downgraded its ratings on 11 major U.S. and European financial institutions, including Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wells Fargo & Co.
Citigroup shares sank 41 cents, or 5.5 percent, to $7.02. Wells Fargo slipped 29 cents to $29.36.
On Thursday, the stock market tumbled, shaken by a negative ratings outlook for industrial conglomerate and Dow component General Electric Co. A drop in oil prices also weighed on stocks, pulling down the energy sector and revealing how downbeat investors are about consumer demand.
The market's losses on Wednesday and Thursday erased most of the Dow's 360-point rally on Tuesday, which was sparked by the Federal Reserve's historic interest rate cut. The central bank set its target for the rate at which banks lend to each other to a range of zero to 0.25 percent, the lowest level on record, and vowed to use "all available tools" to jump-start the economy.
Still, analysts believe Wall Street has entered a period of relative stability, and the market's performance on Friday only reinforced that notion.
"Even though there's been a lot of really bad news coming out about the economy in the last few weeks, especially in unemployment numbers, the market hasn't been reacting negatively to that," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research.
Since their multiyear lows on Nov. 20, the Dow is up 13.6 percent and the S&P 500 is up 18 percent.
Yields on long-term Treasurys recovered from record lows on Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.21 percent late Friday from 2.07 percent late Thursday. The yield on the popular three-month T-bill
- whose yield has at times gone negative due to frenzied buying - was unchanged from late Thursday at zero.
The January contract for light, sweet crude, which expired Friday, fell $2.35 to settle at $33.87, the lowest close in nearly five years after falling at one point to $33.44.
The dollar rose against other major currencies. Gold prices fell.
Markets overseas were mostly lower. Japan's Nikkei stock average slipped 0.91 percent, while Hong Kong's Hang Seng index sank 2.39 percent. Britain's FTSE 100 was down 1.01 percent, Germany's DAX index fell 1.26 percent, and France's CAC-40 fell 0.26 percent.
The Dow Jones industrial average ended the week down 50.57, or 0.59 percent, at 8,579.11. The Standard & Poor's 500 index finished up 8.15, or 0.93 percent, at 887.88. The Nasdaq composite index ended the week up 23.60, or 1.53 percent, at 1,564.32.
The Russell 2000 index finished the week up 17.83, or 3.8 percent, at 486.26.
The Dow Jones Wilshire 5000 Composite Index - a free-float weighted index that measures 5,000 U.S. based companies
- ended at 8,924.03, up 123.85 points, or 1.41 percent, for the week. A year ago, the index was at 14,644.64.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Press; By MADLEN READ and SARA LEPRO]
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