Rocky week on Wall Street
Stocks end mixed after President Bush unveils $13 billion plan to aid auto industry. Trading was volatile because of options expiring and low volume.
NEW YORK (CNNMoney.com) -- Stocks capped a rocky week on a mixed note Friday, as investors weighed the pros and cons of the Bush Administration's plan to bail out the auto industry.
Markets opened sharply higher, but the rally was short-lived as investors remain nervous about the economy.
Friday's session was particularly volatile due to an abundance of options expirations - a quarterly event called "quadruple witching." Light trading volume is also contributing to volatility.
The Dow Jones industrial average (INDU) ended the day down 0.3% and is off about 0.6% for the week.
The broader Standard & Poor's 500 (SPX) index added nearly 0.3% in the day and is up 1% for the week.
Meanwhile, the Nasdaq composite (COMP) closed 0.75% higher. Tech stocks advanced 1.5% this week.
Wall Street started the week focused on the Federal Reserve and the deepening scandal surrounding Bernard Madoff, the money manager accused of running a $50 billion Ponzi scheme.
Stocks slumped Monday but the market rallied on Tuesday after the Fed lowered its key interest rate to a range between 0% and 0.25%. The unprecedented move means the central bank's main tool for boosting economic activity has just about reached its limit.
But the Fed reaffirmed its plans to use more unconventional methods to try and get the economy back on track. Specifically, it will continue purchasing mortgage-backed securities held by government sponsored lenders and is considering buying longer term Treasurys.
Those steps led to a huge rally in the Treasury market with the yield on the benchmark 10-year note and the 30-year note both falling to historic lows.
Stocks slumped anew Wednesday after embattled financial firm Morgan Stanley (MS, Fortune 500) reported a $2.3 billion loss that blew analysts' estimates out of the water.
The effects of quadruple witching were also apparent Thursday as investors rushed to reconcile positions ahead of the options expiration. Stocks seesawed for most of the day before falling sharply in the final hour of trade.
Auto bailout: Before the markets opened Friday, President Bush unveiled details of a rescue plan for General Motors and Chrysler LLC that will make $13.4 billion in federal loans available almost immediately.
The announcement comes after weeks of uncertainty over the government's response to the troubles facing the nation's auto industry. But the outlook for Detroit remains grim.
"Even though the bailout is good in the short term, everybody knows the automakers are just going to keep bleeding," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York. He added that rescuing the auto industry could cost $150 billion, according to some estimates.
Investors have been on edge about a possible bankruptcy among Detroit's Big Three, which could result in steep job losses and prolong the current recession.
GM and Chrysler have both warned that they have insufficient cash to maintain operations into next year without the government loans. Ford Motor is considered more financially healthy.
Even with the government's help, however, the automakers will have to contend with the same challenges facing the rest of corporate America. Namely, rising unemployment, tight credit and low consumer confidence.
"The bottom line is: We're in a deep recession," Rovelli said.
The only economic data due out is a reading on regional and state employment from the Labor Department. The report expands on the government's monthly jobs report and could pressure the market if it paints a dour picture.
In company news, the Japanese electronic company Panasonic said it would acquire its rival Sanyo for up to $9 billion.
Auto stocks: Shares of automakers were mixed while auto suppliers rose as investors mulled the Administration's rescue plan.
GM (GM, Fortune 500) was up more nearly 16%. Ford Motor (F, Fortune 500) edged lower.
Shares of foreign automakers were mixed. Toyota and Nissan both declined slightly while Honda rose modestly.
Meanwhile, auto parts suppliers joined in the rally.
Tenneco Inc. (TEN, Fortune 500), a maker of auto emissions control devices, advanced 9%. Another auto parts manufacturer, Modine Manufacturing Co. (MOD), gained 8.5%.
Banks: Standard & Poor's downgraded 12 major U.S. and European banks, citing ongoing woes in the industry amid deepening troubles in the global economy.
While the ratings agency said recent government support for the financial services industry is helpful, the economic environment remains challenging and banks can expect "lower profitability levels and significantly higher loan losses in the medium term."
Among the banks being downgraded: Citibank (C, Fortune 500), Bank of America (BAC, Fortune 500) and Goldman Sachs (GS, Fortune 500).
Crude oil: Light, sweet crude for January delivery fell $2.35 to settle at $33.87 a barrel on the New York Mercantile Exchange.
The January contract, which expires Friday, dropped nearly $4 to settle below $37 a barrel in the previous session as traders rolled into new contracts and economic concerns weighed on the market.
Crude for February delivery rose 58 cents to $42.25 a barrel.
Bonds: Prices for U.S. Treasury bonds fell after a big rally in the previous sessions.
The benchmark 10-year note fell 15/32 to 114 15/32 and its yield rose to 2.12% from a historic low of 2.07% Thursday. Bond prices and yields move in opposite directions.
The 30-year long bond retreated 29/32 to 140 3/32, with a yield of 2.55%.
Other markets: Global markets were down. Asian shares ended lower. In Europe, Britain's FTSE 100, Germany's DAX both closed more than 1% lower. The CAC-40 in France slid 0.26%.
The dollar rose against the euro to trade at $1.3838 in afternoon trading. The greenback rose against Japan's yen after the Bank of Japan cut a key interest rate to 0.1% from 0.3%.
Gold for February delivery dropped $23.20 to settle at $837.4 an ounce. 
