Stocks advance as GMAC gets financing
The stock market staged a strong advance on the next-to-last day of 2008 after Washington’s latest lifeline to the automobile industry bolstered hopes that the government would do whatever was necessary to tame the recession.
The Treasury Department said late Monday that it would invest $5 billion in GMAC Financial Services, using part of the $700 billion in bank rescue funds.
The government also agreed to lend $1 billion to General Motors, which owns 49% of GMAC, so the carmaker can contribute to the financing arm’s reorganization as a bank holding company.
The money for GMAC is in addition to $17.4 billion in loans the Bush administration agreed this month to provide to the auto industry.
GMAC said it would immediately resume lending to certain customers it had previously said were too great a risk for auto loans. Tight credit for car buyers in recent months has been cited as a factor in plunging vehicle sales.
“This is trying to slow down the economic train wreck,” said Jack Ablin, chief investment officer at Harris Private Bank. “Investors are taking a step back and realizing that this will enable auto buyers to finance their cars and add liquidity to the market.”
Shares of GM rose 20 cents to $3.80.
On the down side, the Conference Board’s consumer confidence index dropped in December to 38, a record low, from a revised 44.7 in November.
Although economists on average had predicted a reading of 45, investors appeared unfazed by the index’s slide after reluctant-to-spend consumers handed retailers their worst holiday season in years or even decades.
The Dow Jones industrial average climbed 184.46 points, or 2.2%, to 8,668.39. The blue chips are down 36% for the year with one trading day remaining.
Broader indexes also moved higher. The Standard & Poor’s 500 index jumped 21.22 points, or 2.4%, to 890.64, leaving it down 41% for the year.
The Nasdaq composite index added 40.38 points, or 2.7%, to 1,550.70. It is down 42% in 2008.
The Russell 2,000 index of smaller-company stocks advanced 16.62 points, or 3.6%, to 482.77. It is off 37% this year.
With many traders away for the holidays, volume was low, which can exaggerate price moves. Advancing issues outnumbered decliners by 4 to 1 on the New York Stock Exchange.
Oil prices fell, erasing some of their gain Monday tied to worries that fighting between Israel and Hamas in the Gaza Strip could indirectly disrupt oil shipments from elsewhere in the Mideast.
Crude futures fell 99 cents to $39.03 on the New York Mercantile Exchange.
The dollar was mixed against other major currencies.
Meanwhile, General Motors said it was offering no-interest or low-rate financing over the next week on several 2008 and 2009 models.
