Stocks rally on bailout hopes

Wall Street gains at end of choppy session on bets that the automakers will get help after all.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Alexandra Twin, senior writer

What impact would a General Motors bankruptcy have on the nation?
  • It would devastate the economy
  • It would be difficult, but a recovery would come
  • It would have no impact

NEW YORK ( -- Stocks rose Friday, ending a choppy session higher, as investors welcomed the Treasury Department's indication it might step in and bail out the troubled automakers after a $14 billion bill collapsed in the Senate.

The Dow Jones industrial average (INDU) added 0.8%. The Standard & Poor's 500 (SPX) index climbed 0.7% and the Nasdaq composite (COMP) gained 2.2%.

For the week, the Dow and S&P 500 ended with modest losses and the Nasdaq posted a slim gain.

Stocks slumped Thursday on fears that the $14 billion auto rescue bill would lose traction in the Senate. Those concerns proved correct. Negotiations fell apart Thursday night, with Democrats, Republicans, the individual companies and the United Auto Workers union unable to reach a compromise.

But on Friday, the White House said it would consider using some of the money set aside to help banks and Wall Street for bailing out the auto industry. The Bush administration said it could access the $700 billion bailout already approved by Congress, known as the Troubled Asset Recovery Program or TARP.

The Treasury Department, which regulates TARP, said in a statement that it was willing to use the money as a short-term solution "until Congress reconvenes and acts to address the long-term viability of the industry."

"It seems like they are at least going to put the automakers in intensive care with an IV drip and keep them alive until the new administration takes over," said Bill Stone, chief investment strategist at PNC Financial Services Group.

"I think the stock market sees that as both good and bad news," Stone said. "This will help, but there's still no real closure."

Experts say the failure of any one of the Big Three could trigger massive job losses and send the U.S. deeper into recession. Automaker shares seesawed through the session. In afternoon trading, GM (GM, Fortune 500) fell 4.3% and Ford Motor (F, Fortune 500) rose 3.5%.

Economy: In addition to the automakers, investors were focused on the day's slew of economic reports.

Retail sales fell 1.8% in November, after falling 2.9% in the previous month. Economists thought sales would fall 2% on average, according to a survey. Sales excluding volatile autos dropped 1.6% after declining a revised 2.4% in the previous month. Economists expected sales excluding autos to slump 1.8%.

The Producer Price Index (PPI), a measure of wholesale inflation, dropped 2.2% in November after falling 2.8% in October. Economists thought PPI would slide 2%. The so-called CORE PPI, which strips out volatile food and energy costs, rose 0.1% as expected after gaining 0.4% in the previous month.

The University of Michigan consumer sentiment index rose to 59.1 from 55.3, versus the consensus estimate of 54.5.

Business inventories fell 0.6% in October, the government reported, versus forecasts for a slide of 0.2%. Inventories fell a revised 0.4% in September.

The U.S. has been in a recession since December 2007, according to a National Bureau of Economic Research report released last week. A majority of top-level executives think the recession will last at least another year, according to a recent Duke University survey.

Company news: Bank of America (BAC, Fortune 500) said late Thursday that it will cut up to 35,000 jobs over the next three years as a result of its purchase of Merrill Lynch and the weak economy. Shares were little changed.

A variety of technology shares bounced, including big cap names Intel (INTC, Fortune 500), Apple (AAPL, Fortune 500) and eBay (EBAY, Fortune 500).

Market breadth was mixed. On the New York Stock Exchange, losers beat winners two to one on volume of 1.43 billion shares. On the Nasdaq, advancers beat decliners seven to six on volume of 1.92 billion shares.

Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.58% from 2.60% Thursday. Treasury prices and yields move in opposite directions.

The 10-year yield dipped below 3% in November for the first time since the note was first issued in 1962.

Lending rates improved modestly. The 3-month Libor rate slipped to 1.92% from 2% Thursday, according to Bloomberg. The overnight Libor held steady at a record low of 0.12%. Libor is a key bank lending rate.

Other markets: In global trading, Asian and European markets ended lower.

The dollar fell versus the euro and the yen.

U.S. light crude oil for January delivery fell $1.70 to settle at $46.28 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery fell $6.10 to $820.50 an ounce.

Gasoline continued its fall to four-year lows, with prices down eight-tenths of a cent to a national average of $1.656 a gallon, according to a survey of credit-card swipes released Friday by motorist group AAA. Prices have been sliding for almost three months and have dropped more than $2 a gallon, or 57%, since the July high of $4.114 a gallon. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.