Logo

NEW YORK – Investors have taken another big gamble on the government's plans to help the economy — hoping that this one will finally work.

All the major indexes rose more than 2 percent Friday, including the Dow Jones industrial average, which rose more than 200 points as Wall Street looked past another bleak jobs report and awaited word from Washington about an economic stimulus plan and changes to the government's financial rescue program. The advance helped propel the indexes to their first winning week after four straight weeks of losses, and put the Nasdaq composite in positive territory for the year to date.

The Senate was expected to vote on its version of a stimulus plan that would include a mix of spending and tax cuts. The Senate bill would cost $937 billion; the House already passed a similar version.

Financial stocks led the market as investors also awaited the government's latest revisions to its lifeline for banks. Treasury Secretary Timothy Geithner and other top officials are close to finishing a plan to overhaul the government's $700 billion financial rescue fund. Geithner is expected to announce the changes in a speech on Monday.

Some investors were worried that the changes would involve nationalizing many banks and, in the process, wiping out shareholders. Many investors are hoping the plan will relax rules requiring businesses to assign a value to all of their assets each quarter. Advocates say altering the rule even temporarily could make it easier for banks to lend without worrying about depleting their cash reserves and running afoul of accounting standards.

Investors waiting for word on the government's plans were unfazed by a terrible employment reading. The Labor Department said U.S. employers slashed 598,000 jobs in January, the most since late 1974. The unemployment rate rose to 7.6 percent, the highest since late 1992.

"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets in Chicago. He said investors are hoping the unemployment report was bad enough to goad lawmakers into swift action on the stimulus plan.

Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said investors now are wondering "will government stimulus stop this virus that's spreading throughout the country?"

Cook said investors are eager for the stimulus plan to pass even if it takes time to work its way into the economy, as many economists predict.

"We just want to see a plan and have a direction," he said. "We can adjust from there and make moves on the fly."

But analysts caution that the plan won't repair the economy's problems overnight.

"As the realization sets in that this is going to take some time to work its way into the system confidence could wane a bit," said Matt King, chief investment officer for Bell Investment Advisors, in Oakland, Calif. In that case, the market would be following its pattern in recent months as other government steps were unveiled — early euphoria dissipated as the reality of a troubled economy set in.

The Dow industrials rose 217.52, or 2.70 percent, to 8,280.59 after rising 106 on Thursday.

Broader stock indicators also jumped. The Standard & Poor's 500 index rose 22.75, or 2.69 percent, to 868.60, and the Nasdaq composite index rose 45.47, or 2.94 percent, to 1,591.71.

The day's gains have left the Nasdaq higher for the year; investors have been turning to the index's tech stocks on the belief they will help lead the market higher. The Nasdaq ended the week with a huge 7.81 percent gain, while the Dow was up 3.5 percent and the S&P 500 rose 5.17 percent.

The Russell 2000 index of smaller companies rose 15.62, or 3.43 percent, to 470.70. It rose 6.13 percent for the week.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where consolidated volume came to 6.38 billion shares compared with 6.51 billion shares traded Thursday.

On Thursday, the major indexes soared more than 1 percent as Wall Street shrugged off troubling economic reports and searched for bargains among battered retail and technology stocks.

Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.99 percent from 2.92 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.27 percent from 0.26 percent.

The dollar was mostly higher against other major currencies. Gold prices edged higher.

Light, sweet crude fell $1 to $40.17 a barrel on the New York Mercantile Exchange.

Friday's rally reflects fear among some investors that they will miss out on a jump in stocks if the government comes up with the right mix of medicine for the economy, King said. Some of the buying was also likely the result of short covering — investors who borrowed stock and sold it on expections the market would fall had to buy stock to repay the loans.

Many of the Friday's steepest gains occurred in hard-hit parts of the market like financials and retailers.

Financial stocks rose. Bank of America Corp. jumped $1.29, or 26.7 percent, to $6.13, while JPMorgan Chase & Co. rose $3.09, or 12.6 percent, to $27.63. Smaller banks also rose. Fifth Third Bancorp rose 99 cents, or 60.4 percent, to $2.63. State Street Corp. advanced $2.95, or 10.7 percent, to $30.49.

Among retailers, Macy's Inc. advanced 95 cents, or 10.9 percent, to $9.70.

Overseas, Britain's FTSE 100 rose 1.49 percent, Germany's DAX index rose 2.97 percent, and France's CAC-40 rose 1.84 percent. Japan's Nikkei stock average rose 1.60 percent.

NEW YORK – Investors' ambivalence about earnings reports gave Wall Street a mixed performance Friday.

Traders pounced on companies showing signs of life and dumped companies whose quarterly results fell short of expectations. Better-than-forecast results from Google Inc. helped technology shares while lackluster numbers from General Electric Co. reinforced investors' concerns about the depths of the recession.

Insurer Aflac Inc. helped ease some of Wall Street's concerns about the financial industry after reassuring investors it had more than enough cash to maintain its credit ratings. The company's stock tumbled 37 percent Thursday on reports it did not have adequate capital to cover risky investments. The company issued a statement and an analyst released a research note backing the company's financial position. Aflac rose 6.9 percent.

The results from GE weighed on industrial names and held the Dow Jones industrial average to a loss as broader indexes climbed. The company's results met Wall Street's lowered expectations but investors grew worried that GE will reduce its dividend. They are also nervous the company could lose its coveted "AAA" credit rating because of the recession that has crimped lending at GE Capital and hurt its industrial and entertainment businesses. GE fell 11 percent.

Stocks ended a volatile session well off their lows. A sizable comeback Friday was the latest back-and-forth seen throughout a turbulent week; the Dow tumbled 4 percent Tuesday, jumped 3 percent Wednesday and fell again Thursday.

Volatility has been more the rule than the exception in recent trading as investors sort through a plethora of wide-ranging earnings reports; the market is looking to companies results and their outlooks to give them some indication of when the recession might lift.

Although earnings and company outlooks ultimately dictated the direction of stocks, this was also the first week of the Obama administration. While the new president pushed Congress to approve an economic stimulus plan, investors still struggled with fears that the now 14-month-old recession will be protracted in spite of the government's efforts.

"I think we had a lot of bad news to absorb and stocks did OK," said Thomas J. Lee, equities analyst at JPMorgan, referring to the week's performance.

On Friday, the Dow industrials fell 45.24, or 0.56 percent, to 8,077.56. The Dow had been down more than 200 points early in the day and briefly moved into positive territory.

Broader stock indicators rose. The Standard & Poor's 500 index rose 4.45, or 0.54 percent, to 831.95, while the Nasdaq composite index rose 11.80, or 0.81 percent, to 1,477.29.

The Russell 2000 index of smaller companies rose 1.51, or 0.34 percent, to 444.36.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where consolidated volume came to 5.72 billion shares compared with 5.75 billion shares traded Thursday.

For the week, the Dow is down 2.5 percent, the S&P 500 is down 2.1 percent and the Nasdaq is ending off 3.4 percent.

"We had bad earnings. It's all coming in below reduced expectations," Lee said.

The results, particularly from the banks, weighed on stocks. Fears arose that banks' were so troubled the government would have to step in and essentially take over some financial companies. Such a move would most likely wipe out shareholders and revive fears that the economy is even worse off than investors had assumed.

Even beyond banks, reports from a range of industries gave fresh evidence of the toll the weak economy is taking and sent markets sputtering out of the gates Friday: Copier and printer maker Xerox Corp. slid 7.4 percent after its results fell short of projections. Capital One Financial Corp., which focuses on credit card lending, reported a loss rather than the profit Wall Street expected after it set aside money to cover bad debt. The stock lost 12 percent.

And Harley-Davidson Inc. said it will cut jobs and reduce shipments because of falling demand. The company's earnings for the final quarter of 2008 fell nearly 60 percent, sending the stock down 7.3 percent.

In other corporate news, The Wall Street Journal is reporting drug maker Pfizer Inc. is in talks to acquire rival Wyeth in a deal valued at more than $60 billion. Citing unidentified sources, the Journal said the discussions have been going on for months, but a deal is not imminent. Wyeth jumped $4.91, or 13 percent, to $43.74, while Pfizer rose 24 cents to $17.45.

Meanwhile, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.62 percent from 2.60 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.09 percent from late Thursday.

The dollar was mostly higher against other major currencies, and gold prices rose.

Light, sweet crude jumped $2.80 to settle at $46.47 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 rose 0.01 percent, Germany's DAX index fell 0.96 percent, and France's CAC-40 lost 0.71 percent. Japan's Nikkei stock average fell 3.81 percent.

NEW YORK – Wall Street started 2009 with a big rally Friday as investors, brushing aside a disappointing report on manufacturing, sent the Dow Jones industrials up more than 250 points and to their first close above 9,000 in two months. All the major indexes shot up more than six percent for the week.

Reuters – A specialist works on the floor of the New York Stock Exchange in New York January 2, 2009. U.S. stocks

The market lived up to the hopes of many analysts that it would have a fresh start in the new year after a horrific 2008. But many traders were also waiting to see how the market fares next week; they're cognizant of the fact that post-holiday volume was light and therefore Friday's trading might not be the best indicator of market sentiment.

Still, the market held to its recent pattern of taking bad economic news in stride, a pattern that began to emerge after it touched multiyear lows on Nov. 20.

"Over the last month you've started to see a change in sentiment and this certainly advances that," said Carl Beck, partner at Harris Financial Group in Richmond, Va.

The Institute for Supply Management said its manufacturing activity index fell to the lowest level in 28 years in December. The ISM, a trade group of purchasing executives, said its manufacturing index fell to 32.4 last month from 36.2 in November. Economists polled by Thomson Reuters had expected a reading of 35.5; a figure below 50 indicates contraction.

"We like to see the markets shrug off the bad news. That typically is a sign that we're forming a bottom," said Eric Thorne, an investment adviser at Bryn Mawr Trust.

Todd Leone, managing director at Cowen & Co., cautioned against reading too much into Friday's advance and said the first full week of the new year should provide insight into investor sentiment for 2009.

"The first five days are usually very telling," Leone said. "I'm not sure we'll be up or down." He said an advance in stocks Friday wasn't a surprise as some investors start the year by wading into the market. He said selling is more likely to occur next week.

The Dow rose 258.30, or 2.94 percent, to 9,034.69, finishing the week up 6.1 percent. The blue chips last closed above 9,000 on Nov. 5, when they stood at 9,139.27.

The Dow, the oldest of the big market indexes, fell 33.8 percent in 2008, its worst performance since 1931, during the Great Depression.

Like the Dow, broader stock indicators also advanced for the third straight session. The Standard & Poor's 500 index rose 28.55 percent, or 3.16 percent, to 931.80, its highest close since Nov. 5. The Nasdaq composite index rose 55.18, or 3.50 percent, to 1,632.21.

For the week, the S&P 500 finished up 6.8 percent, while the Nasdaq rose 6.7 percent.

The Russell 2000 index of smaller companies rose 6.39, or 1.28 percent, to 505.84.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange. Consolidated volume came to 3.48 billion shares, compared with 3.75 billion on Wednesday.

Bond prices fell as investors took on riskier assets including stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.39 percent late Friday from 2.22 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments and in great demand since the credit markets seized up in September, fell to 0.07 percent from 0.08 percent Wednesday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose $1.74 to settle at $46.34 a barrel on the New York Mercantile Exchange.

Thorne contends 2009 could be a strong year for Wall Street because most investors are so shaken from the sell-off in 2008, which erased six years of gains in stocks. Market bottoms often emerge because investors are so pessimistic or because stocks seem incapable of making any sustained recovery.

"A bottom isn't formed in one day or even in one month but probably over several months," he said. "Expectations are extremely low for the economy, for corporate earnings and for the stock market itself."

Since hitting multiyear lows on Nov. 20, the Dow has advanced 19.6 percent, while the S&P 500 is up 23.8 percent.

"We're very confident that the $9 trillion that is in cash right now will look to find a home in better-performing assets," he said, referring to the amount of money invested in conservative but low-yielding areas like money market funds. Yields on safe investments like Treasurys have fallen to virtually nil as investors have clamored for safety and surrendered hopes of even earning a return on their money.

Next week brings a flurry of economic readings and potentially early comments from companies on their 2008 results and 2009 forecasts.

Traders will be anxiously awaiting a Labor Department report next Friday on December employment. A month ago, Wall Street showed newfound resiliency in the face of a bad reading on what is typically the most important economic report of the month. Stocks initially sagged but finished with big gains Dec. 5 after the government reported that employers slashed a larger-than-expected 533,000 jobs in November. Investors were hoping the report would prompt Washington to take broader steps to shore up the economy.

"The employment numbers will almost undoubtedly be very ugly. What will be interesting to see is what the market's reaction will be to those numbers," Thorne said. "We're also very interested to see what the corporate earnings reporting season will be like."

Harris Financial's Beck said the earnings reports could be a turning point for the market. "People expect earnings to be really bad. If they come out and they're not quite as bad, you could see this momentum in the market continue," he said. "If they come out even worse than expectations, that could be a major set back."

Stocks overseas also began the new year with a rally. Britain's FTSE 100 rose 2.88 percent, Germany's DAX index jumped 3.39 percent, and France's CAC-40 increased 4.09 percent. Markets in Japan were closed for a holiday.

___

The Dow Jones industrial average ended the week up 519.14, or 6.1 percent, at 9,034.69. The Standard & Poor's 500 index rose 59, or 6.8 percent, to 931.80. The Nasdaq composite index ended the week up 101.97, or 6.7 percent, at 1,632.21.

The Russell 2000 index finished the week up 29.07, or 6.1 percent, at 505.84.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended at 9,364.54, up 595.19 points, or 6.79 percent, for the week. A year ago, the index was at 14,613.57.