Stocks extend advance in year’s final session

Stocks rallied Wednesday on a drop in first-time jobless claims and an indication that the Treasury Department would expand aid to the auto industry.

All 10 broad industry groups in the Standard & Poor’s 500 stock index advanced after the Labor Department said new unemployment claims fell last week to their lowest level in almost two months, even as the total number of people collecting jobless benefits reached a 26-year high.

The major stock indexes jumped to their highs of the day after the Treasury Department said it had drafted broad guidelines to rescue any company deemed important to making or financing cars.

The Dow Jones industrial average climbed 108 points, or 1.2%, to 8,776.39.

Broader stock indicators also rose. The Standard & Poor’s 500 index gained 12.61 points, or 1.4%, to 903.25. The Nasdaq composite index jumped 26.33 points, or 1.7%, to 1,577.03.

The Russell 2,000 index of smaller companies surged 3.5%.

The gains Wednesday pared the indexes’ declines for 2008 to 34% for the Dow, 39% for the S&P; 500, 41% for the Nasdaq and 35% for the Russell 2,000.

The total value of all U.S. stocks fell $6.9 trillion, or 38%. It was the worst year for the Dow since 1931 and the worst for the S&P; since 1937.

At its lowest closing level of 2008 on Nov. 20, the S&P; 500 was down 49% for the year and 52% from its October 2007 record high.

The plunge came as more than $1 trillion in credit-related losses at global financial companies dragged the U.S., Europe and Japan into the first simultaneous recessions since World War II.

Financial companies tumbled the most among the 10 main industries in the S&P; 500 in 2008, falling 57% collectively. The retreat was driven by banks racking up losses stemming from the 2007 collapse of the subprime-mortgage market.

Shares of companies that sell discounted goods resisted the downward trend as consumers reined in spending. Family Dollar Stores jumped 36% for the biggest advance in the S&P; 500 in 2008. The only stocks in the 30-member Dow to gain for the year were Wal-Mart Stores, which climbed 18%, and McDonald’s, which rose 5.6%.

Announced takeovers plunged 43% in 2008 to $873 billion from 2007’s record level. Just 43 companies went public, the fewest since 1979, raising a paltry $50 million, according to Renaissance Capital’s IPOHome.com.

Although stocks tumbled, U.S. government bonds posted their best year since 1995 on speculation that the recession would extend into the first half of 2009.

The S&P; 500 has rebounded 20% since its 11-year low reached Nov. 20. The gains came as the government rescued Citigroup, President-elect Barack Obama pledged to stimulate growth with massive spending on infrastructure projects and the Federal Reserve slashed interest rates to as low as zero to combat the worst financial crisis in seven decades.

Ten of 11 investment strategists surveyed by Bloomberg expect the S&P; 500 to rise in 2009. On average they forecast a gain of 17%.