Hopes of support for automakers drive stocks up
Stocks rebounded from an early sell-off to end higher Friday after the Bush administration indicated that it was prepared to assist troubled U.S. automakers.
The Dow Jones industrial average closed up nearly 65 points after falling more than 200 in early trading after the Senate late Thursday failed to agree on a $14-billion bailout package for General Motors and Chrysler.
The market advanced despite fresh news showing continued economic weakness.
The Labor Department said wholesale prices sank a greater-than-expected 2.2% in November, marking the fourth decline in a row and raising deflation fears. And businesses slashed inventories in October by the largest amount in five years.
The Dow rose 64.59 points, or 0.8%, to 8,629.68. The Standard & Poor’s 500 index climbed 6.14 points, or 0.7%, to 879.73, and the Nasdaq composite index jumped 32.84 points, or 2.2%, to 1,540.72.
The Russell 2,000 index of smaller companies surged 3.8%.
The number of stocks advancing outpaced decliners by 3 to 2 on the New York Stock Exchange.
For the week, the Dow was nearly flat, while the S&P; 500 rose 0.4% and Nasdaq gained 2.1%.
Stock investors’ increasing tolerance for bad economic and corporate news, many analysts say, suggests that the market may have reached a bottom after the sharp declines of recent months.
Since hitting their lows of the current bear market Nov. 20, the Dow is up 14%, and the S&P; 500 and Nasdaq are up 17%. Still, from their October 2007 highs, the Dow remains down 39%, the S&P; is down 44% and Nasdaq is off 46%.
GM and Chrysler have said they could run out of cash within weeks without government help. Ford Motor has said it has enough cash to make it through next year.
GM dropped 18 cents to close at $3.94 after trading as low as $2.61 soon after the opening bell.
Ford rose 14 cents to $3.04. Chrysler’s shares aren’t publicly traded.
U.S.-traded shares of Honda Motor lost 4.7% after the Japanese automaker said it would cut vehicle production further in North America because of waning demand.
Meanwhile, investors grappled with the fresh prospect of diminished confidence in Wall Street after Bernard L. Madoff, a former chairman of the industry’s trade group, was arrested on a securities fraud charge. Madoff was accused of running a phony investment business that authorities said lost $50 billion.
“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.”
In other market highlights:
* General Growth Properties jumped 25% after the second-largest U.S. mall owner refinanced $814 million of mortgage loans. Real estate companies in the S&P; 500 rose 8.7% as a group.
* Fairchild Semiconductor International tumbled 13% after the chip maker reduced its fiscal fourth-quarter sales forecast and said it would cut 1,100 jobs, or 12% of its workforce.
* Waters Corp. sank 11%. The maker of analytical instruments cut its fourth-quarter profit and sales forecasts, citing a stronger dollar and the global economic slump.
* Stanley Works fell 2.8% after the toolmaker announced layoffs and cut its 2008 forecast below expectations.
* Stocks slumped in overseas markets on news of the death of the auto-bailout legislation. Key indexes fell 5.6% in Japan, 5.5% in Hong Kong, 2.5% in Britain, 2.2% in Germany and 2.8% in France.
* Oil prices returned to their downward ways. After gaining almost $6 a barrel over the two preceding days, crude futures fell $1.70 to settle at $46.28 on the New York Mercantile Exchange.
